SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
---------------------------
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2004.
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____ to _______
-----------------------------
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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). 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. 9,454,398 Shares, $1 par value,
as of April 14, 2004.
TABLE OF CONTENTS
Page
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Number
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet at March 31, 2004 (unaudited)
and December 31, 2003 3
Condensed Consolidated Statement of Income for the three months ended
March 31, 2004 and 2003 (unaudited) 5
Condensed Consolidated Statement of Cash Flows for the three months
ended March 31, 2004 and 2003 (unaudited) 6
Notes to Condensed Consolidated Unaudited Financial Statements 7
Independent Accountants' Review Report 11
Item 2. Management's Discussion and Analysis of Financial Condition and
Operating Results 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
Item 4. Controls and Procedures 13
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
-2-
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data) March 31, 2004 December 31, 2003
-------------------- ----------------------
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents $ 26,193 $ 21,399
Marketable securities 2,513 2,156
Accounts receivable, less allowance for doubtful accounts 48,225 47,972
Inventories 59,717 59,817
Miscellaneous receivables and prepaid expenses 7,613 11,439
Deferred income taxes 1,837 1,975
-------------------- ----------------------
Total Current Assets 146,098 144,758
Property, plant and equipment, less allowances for depreciation and
amortization 42,130 42,946
Deferred income taxes 13,208 13,201
Goodwill 28,649 28,649
Other assets 17,907 17,389
-------------------- ----------------------
Total Assets $247,992 $246,943
==================== ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 8,860 $ 8,240
Accrued expenses and other liabilities 22,795 27,176
Income taxes 1,020 ---
Current portion of long term debt 1,489 1,462
-------------------- ----------------------
Total Current Liabilities 34,164 36,878
-------------------- ----------------------
Accrued liability under security bonus plans 20,721 20,823
Long term debt 1,190 1,573
Other 14,424 14,318
-------------------- ----------------------
36,335 36,714
-------------------- ----------------------
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-(2004-9,469,064
shares; 2003-9,493,511 shares) 9,469 9,494
-3-
Capital in excess of par value 2,747 2,667
Retained earnings 165,836 161,831
Accumulated other comprehensive income (559) (641)
-------------------- ----------------------
Total Stockholders' Equity 177,493 173,351
-------------------- ----------------------
Total Liabilities and Stockholders' Equity $247,992 $246,943
==================== ======================
See notes to condensed consolidated financial statements.
-4-
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Amounts in thousands, except per share data)
For the Three Months Ended
March 31,
2004 2003
------------------ ------------------
Net sales $100,658 $96,075
Cost of goods sold 35,261 34,548
------------------ ------------------
Gross profit 65,397 61,527
Selling, general and administrative expenses 55,335 55,265
------------------ ------------------
Operating income 10,062 6,262
------------------ ------------------
Investment and other income 528 359
Interest expense 63 ---
------------------ ------------------
Income before income taxes 10,527 6,621
Provision for income taxes 4,001 2,863
------------------ ------------------
Net income $6,526 $ 3,758
================== ==================
Net income per share of common stock:
Basic $0.69 $0.40
================== ==================
Diluted $0.69 $0.40
================== ==================
Cash dividends declared per share of common stock $0.18 $0.16
================== ==================
Weighted average shares outstanding:
Basic 9,487 9,492
================== ==================
Diluted 9,515 9,511
================== ==================
See notes to condensed consolidated financial statements.
-5-
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands) For the
Three Months Ended
March 31,
2004 2003
---------------- ---------------
Operating activities:
Net income $ 6,526 $ 3,758
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,700 1,644
Changes in operating assets and liabilities (317) (3,855)
Other 598 707
---------------- ---------------
Net Cash Provided by Operating Activities 8,507 2,254
---------------- ---------------
---------------- ---------------
Investing activities:
Additions to property, plant and equipment (528) (1,333)
Purchases of marketable securities (2,278) (1,654)
Proceeds from sale of marketable securities 1,921 1,809
---------------- ---------------
Net Cash Used in Investing Activities (885) (1,178)
---------------- ---------------
Financing activities:
Purchases of treasury stock (856) (127)
Payments on long term debt (356) ---
Dividends paid (1,709) (1,519)
Other 93 (124)
---------------- ---------------
Net Cash Used in Financing Activities (2,828) (1,770)
---------------- ---------------
Increase (Decrease) in Cash and Cash Equivalents 4,794 (694)
Cash and Cash Equivalents at Beginning of Period 21,399 7,591
---------------- ---------------
Cash and Cash Equivalents at End of Period $26,193 $ 6,897
================ ===============
See notes to condensed consolidated financial statements.
-6-
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 Lawson Products, Inc.'s (the
"Company") Annual Report on Form 10-K for the year ended December 31, 2003. The
Condensed Consolidated Balance Sheet as of March 31, 2004, the Condensed
Consolidated Statements of Income for the three month periods ended March 31,
2004 and 2003 and the Condensed Consolidated Statements of Cash Flows for the
three month periods ended March 31, 2004 and 2003 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, 2004
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2004.
B) Total comprehensive income and its components, net of related tax, for the
first quarter of 2004 and 2003 are as follows (in thousands):
2004 2003
---- ----
Net income $6,526 $3,758
Foreign currency translation adjustments 82 341
--------------------------
Comprehensive income $6,608 $4,099
==========================
The components of accumulated other comprehensive income, net of related tax, at
March 31, 2004 and December 31, 2003 are as follows (in thousands):
2004 2003
---- ----
Foreign currency translation adjustments $ (559) $ (641)
-----------------------
Accumulated other comprehensive income $ (559) $ (641)
=======================
C) Earnings per Share
The calculation of dilutive weighted average shares outstanding at March 31,
2004 and 2003 are as follows (in thousands):
2004 2003
---- ----
Basic weighted average shares outstanding 9,487 9,492
Dilutive impact of options outstanding 28 19
-----------------------------
Dilutive weighted average shares outstanding 9,515 9,511
=============================
D) Revolving Line of Credit
In March 2001 the Company entered into a $50 million revolving line of credit.
The revolving line of credit matures five years from the closing date and
carries an interest rate of prime minus 150 basis points floating or LIBOR plus
75 basis points, at the Company's option. Interest is payable quarterly on prime
borrowings and at the earlier of quarterly or maturity with respect to the LIBOR
contracts. The line of credit contains certain financial covenants regarding
interest coverage, minimum stockholders' equity and working capital, all of
which the Company was in compliance with at March 31, 2004. The Company had no
borrowings outstanding under the line at March 31, 2004 and December 31, 2003.
-7-
E) Other Charges
The table below shows an analysis of the Company's reserves for severance and
related expenses for the first quarter of 2004 and 2003:
Three Months Ended
March 31,
--------------------------
In thousands 2004 2003
--------------------------
Balance at beginning of year $2,476 $876
Cash paid in the quarter (365) (140)
--------------------------
Balance at March 31 $2,111 $736
--------------------------
F) Intangible Assets
Intangible assets subject to amortization, included within other assets, were as
follows (in thousands):
March 31, 2004
Net
Gross Accumulated Carrying
Balance Amortization Amount
------- ------------ ------
Trademarks and tradenames $1,747 $ 897 $ 850
Customer Lists 953 376 577
------ ------- ------
$2,700 $1,273 $1,427
------ ------- ------
December 31, 2003
Net
Gross Accumulated Carrying
Balance Amortization Amount
------- ------------ ------
Trademarks and tradenames $1,747 $ 851 $ 896
Customer Lists 953 368 585
------ ------- ------
$2,700 $ 1,219 $1,481
------ ------- ------
Trademarks and tradenames are being amortized over a weighted average 15.14
years. Customer lists are being amortized over 13.96 years. Amortization expense
for intangible assets is expected to be $116,000, $83,000, $83,000, $83,000 and
$83,000 for 2004 and the next four years.
G) Accounting for Stock-Based Compensation
The Company adopted FASB Statement No. 148, Accounting for Stock Based
Compensation - Transition and Disclosure. This Statement requires additional
disclosure within interim financial statements. The following table shows the
effect on net income and earnings per share as required by FASB Statement No.
123, "Accounting for Stock-Based Compensation."
Three Months Ended
March 31
----------------------------
In thousands 2004 2003
----------------------------
Net income-as reported $6,526 $3,758
Deduct: Total stock based employee
-8-
compensation expense determined under
fair value method, net of tax (3) (7)
----------------------------
Net income-pro forma 6,523 3,751
Basic and diluted earnings per share
-as reported .69 .40
Basic earnings per share-pro forma .69 .40
Diluted earnings per share-pro forma .69 .39
The Company's incentive stock plan provides for the issuance of Stock
Performance Rights (SPRs). These SPRs vest at 20% per year and entitle the
recipient to receive a cash payment equal to the excess of the market value of
the Company's common stock and the SPR price when the SPRs are surrendered. The
Company records an accrued liability based on the number of outstanding vested
SPRs and the market value of the Company's common stock. A $73,000 and $243,000
reduction of this compensation expense accrual was recorded in the first quarter
of 2004 and 2003, respectively.
H) Segment Reporting
The Company has four reportable segments: Maintenance, Repair and Replacement
distribution in the U.S. (MRO-US), International Maintenance, Repair and
Replacement distribution in Canada (MRO-CAN), Original Equipment Manufacturer
distribution and manufacturing in the U.S. (OEM-US), International Original
Equipment Manufacturer distribution in the United Kingdom and Mexico (OEM-INTL).
The operations of the Company's MRO distribution segments distribute a wide
range of MRO parts to repair and maintenance organizations by the Company's
force of independent field sales agents, and inside sales personnel.
The operations of the Company's OEM segments manufacture and distribute
component parts to OEM manufacturers through a network of independent
manufacturers representatives as well as internal sales personnel.
The Company's reportable segments are distinguished by the nature of products
distributed and sold, types of customers, manner of servicing customers, and
geographical location.
The Company evaluates performance and allocates resources to reportable segments
primarily based on operating income.
Financial information for the Company's reportable segments consisted of the
following:
Three Months Ended
March 31,
-----------------------------
In thousands 2004 2003
-----------------------------
Net sales
MRO-US $ 76,396 $ 75,047
MRO-CAN 5,052 4,386
OEM-US 14,740 14,271
OEM-INTL 4,470 2,371
-----------------------------
Consolidated total $ 100,658 $ 96,075
-----------------------------
Operating income(loss)
MRO-US $ 9,212 $ 6,104
MRO-CAN 400 324
OEM-US 478 475
OEM-INTL (28) (641)
-----------------------------
Consolidated total $ 10,062 $ 6,262
-----------------------------
The reconciliation of segment profit to consolidated income before income taxes
consisted of the following:
-9-
Three Months Ended
March 31,
---------------------------
In thousands 2004 2003
---------------------------
Total operating income
from reportable segments $ 10,062 $ 6,262
Investment and other income 528 359
Interest expense (63) ---
---------------------------
Income before income taxes $ 10,527 $ 6,621
---------------------------
Asset information related to the Company's reportable segments consisted of the
following:
March 31, December 31,
In thousands 2004 2003
---------------------------
Total assets
MRO-US $168,294 $168,783
MRO-CAN 17,003 17,137
OEM-US 36,622 36,076
OEM-INTL 11,028 9,771
---------------------------
Total for reportable segments 232,947 231,767
Corporate 15,045 15,176
---------------------------
Consolidated total $247,992 $246,943
---------------------------
At December 31, 2003, the carrying value of goodwill within each reportable
segment was as follows (in thousands):
MRO-US $ 22,104
MRO-CAN 4,294
OEM-US 2,251
---------
Consolidated total $ 28,649
---------
I) Impact of Recently Issued Accounting Standards
In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, "Consolidation of Variable Interest Entities (FIN 46)."
FIN 46 explains how to identify variable interest entities (VIE) and how an
enterprise assesses its interest in a VIE to decide whether to consolidate the
VIE. It requires existing unconsolidated VIEs to be consolidated if the Company
is the primary beneficiary. The Company adopted FIN 46 as of July 1, 2003, which
has resulted in the consolidation of the Company's investment in a limited
partnership, which owns an office building in Chicago, Illinois. In conjunction
with the consolidation of its investment, the Company has recorded the long-term
debt of the VIE, which represents a mortgage payable relative to the building,
of approximately $2.7 million at March 31, 2004. The interest rate of the
mortgage payable is 7.315%, with a maturity date of January 1, 2006. The
building and land have a net carrying value of approximately $4.4 million, which
are included in property, plant and equipment. The remaining assets, none of
which are significant, are recorded in other assets.
-10-
Independent Accountants' Review Report
Board of Directors and Stockholders
Lawson Products, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of Lawson
Products, Inc. and subsidiaries as of March 31, 2004 and the related condensed
consolidated statements of income and cash flows for the three-month periods
ended March 31, 2004 and 2003. 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
auditing standards generally accepted in the United States, 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 review, 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 accounting principles generally
accepted in the United States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of Lawson
Products, Inc. as of December 31, 2003, 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 25, 2004, 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, 2003, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
April 14, 2004
-11-
"Safe Harbor" Statement under the Securities Litigation Reform Act of 1995: This
Quarterly Report on Form 10-Q 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 actual results to differ materially from those
described in the forward-looking statements. 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 business, operating margin risk due to competitive
pricing and operating efficiencies, successful integration of acquisitions, the
Company's dependence on key personnel and the length of economic downturns in
the Company's markets. In the event of continued economic downturn, the Company
could experience additional customer bankruptcies, reduced volume of business
from its existing customers and lost volume due to plant shutdowns or
consolidations by the Company's customers and other factors that may be referred
to or noted in the Company's reports filed with the Securities and Exchange
Commission from time to time. 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.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Revenues
- --------
Net sales for the three-month period ended March 31, 2004 increased 4.8% to
$100,658,000, from $96,075,000 in the similar period of 2003. The impact of
foreign exchange fluctuations accounted for approximately $1.0 million of the
reported increase.
Combined Maintenance, Repair and Replacement distribution (MRO-US and MRO-CAN)
net sales increased $2.0 million in the first quarter of 2004 to $81.4 million
from $79.4 million in the first quarter of 2003. Sales increases were achieved
by both the U.S. and Canadian MRO segments. The sales increases in the U.S. is
principally attributable to a higher average order size. In Canada,
substantially all of the sales increase in Canada, approximately $0.7 million,
is attributable to foreign exchange fluctuations.
Combined Original Equipment Manufacturer (OEM-US and OEM-INTL) net sales
increased $2.6 million to $19.2 million from $16.6 million for the same period
in 2003. Sales were higher in the U.S. and internationally for the combined OEM
segment, with increased sales in the OEM-INTL segment accounting for most of the
sales gain. The increase in the OEM-INTL segment resulted primarily from more
products sold to existing accounts, and the addition of new customers. The
impact of foreign exchange fluctuations accounted for $0.3 million of the $2.1
million sales increase achieved by the OEM-INTL segment.
Operating Income
- ----------------
Operating income for the three-month period ended March 31, 2004 rose $3.8
million to $10.1 million, a 60.7% increase over the comparable period of 2003.
The increase in consolidated operating income is attributable to the higher net
sales and improved gross margins. Operating income for the combined MRO segments
advanced $3.2 million, a 49.5% gain over the first quarter of 2003. This
increase resulted primarily from the higher net sales noted above and improved
gross margins. The combined OEM segments had operating income of $0.5 million
for the three month period ended March 31, 2004 compared to an operating loss of
$0.2 million for the similar period of 2003. This improvement is primarily
attributable to a significantly lower operating loss incurred by the
international segment, resulting from higher sales.
-12-
Net Income
- ----------
For the first quarter of 2004, net income increased 73.7%, to $6.5 million ($.69
per diluted share), compared to $3.8 million ($.40 per diluted share) in the
similar period of 2003. This increase in net income resulted from higher sales
and improved gross margins, as noted above, a decline in the effective tax rate,
and the Company's efforts to contain costs. The tax rate decline was principally
due to lower international losses in 2004 compared to 2003. No tax benefit was
provided for the international losses in either year. Per share net income for
2004 and 2003 was positively impacted by the Company's share repurchase program.
Liquidity
- ---------
Cash flows provided by operations for the three months ended March 31, 2004 and
March 31, 2003 were $8.5 million and $2.3 million, respectively. In 2004, cash
flows provided by operations were positively impacted by higher net income,
while net operating assets and liabilities remained flat compared to balances at
the previous year-end. In 2003, the net decrease in operating liabilities,
primarily accrued expenses and accounts payable, negatively impacted operating
cash flows. Additions to property, plant and equipment were $0.5 million and
$1.3 million for the three months ended March 31, 2004 and 2003, respectively.
Additions to property, plant and equipment in 2004 were incurred for the
purchase of equipment. In 2003, capital expenditures were incurred primarily for
improvement of existing facilities and for the purchase of related equipment.
The Company increased the cash dividend to $.18 per share on common shares for
the first quarter of 2004. This is a 12.5% increase over the previous $.16 per
share on common shares paid in the first quarter of 2003.
During the first quarter of 2004, the Company purchased 28,547 shares of its own
common stock for approximately $856,000 pursuant to the 2000 Board authorization
to purchase up to 500,000 shares. In the first three months of 2003, the Company
purchased 4,600 shares of its own common stock for approximately $127,000
pursuant to the 2000 Board authorization noted above. All shares purchased as of
March 31, 2004 have been retired. Funds to purchase these shares were provided
by investments and cash flows from operations.
Current investments, cash flows from operations, and the $50,000,000 unsecured
line of credit are expected to be sufficient to finance the Company's future
growth, cash dividends and capital expenditures.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in market risk at March 31, 2004 from that
reported in the Company's Annual Report on Form 10-K for the year ended December
31, 2003.
ITEM 4. CONTROLS AND PROCEDURES
The Company's chief executive officer and chief financial officer have
concluded, based on their evaluation as of the end of the period covered by this
report, that the Company's "disclosure controls and procedures" (as defined in
the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) are effective
to ensure that information required to be disclosed in the reports that the
Company files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. There have been no
significant changes in our internal controls over financial reporting or in
other factors that could significantly affect these controls subsequent to the
date of the previous mentioned evaluation.
-13-
PART II
OTHER INFORMATION
Items 1, 3, 4 and 5 are inapplicable and have been omitted from this report.
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities
(c) Total Number (d) Maximum Number
(a) Total Of Shares Purchased of Shares that May
Number of (b) Average as Part of Publicly Yet Be Purchased
Shares Price Paid Announced Plans Under the Plans
Period Purchased per Share or Programs or Programs
- --------------------------------------------------------------------------------------------------------------
01/01/04 - 01/31/04 --- --- --- 286,399
02/01/04 - 02/29/04 8,242 29.76 8,242 278,157
03/01/04 - 03/31/04 20,305 30.07 20,305 257,852
- --------------------------------------------------------------------------------------------------------------
Total 28,547 29.98 28,547 257,852
- --------------------------------------------------------------------------------------------------------------
On May 16, 2000, the Board of Directors of the Company authorized the purchase
of up to 500,000 shares of its own common stock. There is no expiration date
relative to this authorization.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
--------
15 Letter from Ernst & Young LLP Regarding Unaudited
Interim Financial Information
31.1 Certification of Chief Executive Officer pursuant to
18 U.S.C. Section 1350 as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to
18 U.S.C. Section 1350 as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
32 Certification of Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
-------------------
Current Report on Form 8-K, filed with the Securities and
Exchange Commission on March 3, 2004, regarding the Company's results
from operations for the year ended December 31, 2003.
-14-
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 May 6, 2004 /s/ Robert J. Washlow
------------- --------------------------------------
Robert J. Washlow
Chief Executive Officer and
Chairman of the Board
Dated May 6, 2004 /s/ Thomas Neri
------------ --------------------------------------
Thomas Neri
Executive Vice President, Chief
Financial Officer, and Treasurer
-15-
Exhibit 15
April 14, 2004
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 14, 2004 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, 2004.
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.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
Exhibit 31.1
CERTIFICATIONS
--------------
I, Robert J. Washlow, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Lawson Products,
Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial information;
and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: May 6, 2004
/s/ Robert J. Washlow
- --------------------------------
Robert J. Washlow
Chief Executive Officer
Exhibit 31.2
CERTIFICATIONS
--------------
I, Thomas Neri, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Lawson Products,
Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial information;
and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: May 6, 2004
/s/ Thomas Neri
- --------------------------------------------
Thomas Neri
Executive Vice President, Chief Financial Officer, and Treasurer
Exhibit 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Lawson Products, Inc. (the
"Company") on Form 10-Q for the period ending March 31, 2004 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned Chief Executive Officer and Chief Financial Officer of the Company
hereby certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of
the Sarbanes-Oxley Act of 2002 that based on their knowledge: 1) the Report
fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, and 2) the information contained in the Report fairly
presents, in all material respects, the financial condition and results of
operations of the Company as of and for the periods covered in the Report.
/s/ Robert J. Washlow
- -------------------------------------------------------
Robert J. Washlow, Chief Executive Officer
/s/ Thomas Neri
- -------------------------------------------------------
Thomas Neri, Executive Vice President,
Chief Financial Officer, and Treasurer
May 6, 2004
A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement
required by Section 906, has been provided to Lawson Products, Inc. and will be
retained by Lawson Products, Inc.and furnished to the Securities and Exchange
Commission or its staff upon request.
The foregoing certification is being furnished to the Securities and Exchange
Commission as an exhibit to the Form 10-Q and shall not be considered filed as
part of the Form 10-Q.