Lawson Products, Inc. Announces Second Quarter 2006 Results
DES PLAINES, Ill., Aug 02, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- Lawson Products, Inc. (Nasdaq: LAWS) (the "Company"), an international distributor of products, services and systems to the MRO and OEM marketplaces, today announced financial results for its second quarter ended June 30, 2006. Net sales for the second quarter increased by 17.0 percent to $131.0 million. Net income decreased 42.8 percent to $3.2 million for the second quarter of 2006 compared with $5.6 million for the second quarter of 2005. On a generally accepted accounting principles (GAAP) basis, diluted earnings per share were $0.36 in the quarter, a 41.0 percent decrease from $0.61 in the 2005 second quarter.
Second quarter 2006 operating income was $5.1 million (GAAP basis) compared to $9.4 million in the prior year. Excluding costs associated with stock performance rights, a loss on sale of equipment and legal costs associated with the ongoing investigation being conducted by the U.S. Attorney's office for the Northern District of Illinois, adjusted non-GAAP operating income for the second quarter 2006 was $7.2 million compared to $8.8 million in the prior year quarter. The $1.6 million decline in quarterly adjusted operating income was primarily due to higher general and administrative costs, which include the Company's on-going investments in marketing and technology initiatives, including the addition of personnel in these areas. Second quarter 2006 results include the operations of Rutland Tool & Supply Co., which was acquired in December 2005. Rutland accounted for $14.5 million of net sales and $0.7 million of operating income in the second quarter 2006.
(References to "Adjusted non-GAAP Operating Income" in this release are reconciled to GAAP operating income on the attached income statement.)
"The second quarter was challenging," said Robert J. Washlow, Chairman and CEO. "Management remains focused on building the sales and operations platforms that are critical to the Company's long-term growth and profitability. For the second quarter, our growth initiatives did not drive sales gains to anticipated levels, resulting in lower earnings performance overall. Management believes that the Company's marketing and technology growth initiatives remain on track, and management will continue to monitor its progress on these initiatives. In addition, legal costs associated with the on-going government investigation into prior sales practices had a negative impact on our second quarter performance," Washlow continued.
About Lawson Products
Lawson Products is an international leader in selling and distributing systems, services and products to the industrial, commercial and institutional maintenance, repair and replacement (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, 2005. 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 STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
(Amounts in thousands, June 30, June 30,
except per share data) 2006 2005 2006 2005
Net sales $130,990 $111,957 $262,865 $217,615
Cost of goods sold 53,729 42,552 108,807 83,049
Gross profit 77,261 69,405 154,058 134,566
Selling, general and
administrative
expenses 71,355 60,053 139,848 116,557
Loss on sale of
equipment 806 --- 806 ---
Operating income (a) 5,100 9,352 13,404 18,009
Investment and other
income 422 431 981 506
Interest expense --- (6) --- (6)
Income from continuing
operations before
income taxes and
cumulative effect
of accounting change 5,522 9,777 14,385 18,509
Provision for income
taxes 2,273 3,930 5,819 7,452
Income from continuing
operations before
cumulative effect of
accounting change 3,249 5,847 8,566 11,057
Loss from discontinued
operations, net of
income taxes (44) (239) (12) (493)
Income before cumulative
effect of accounting
change 3,205 5,608 8,554 10,564
Cumulative effect of
accounting change, net
of income taxes --- --- (361) ---
Net income $3,205 $5,608 $8,193 $10,564
Basic Income (Loss)
per share of common
stock:
Continuing operations
before cumulative
effect of accounting
change $0.36 $0.64 $0.95 $1.21
Discontinued operations --- (0.03) --- (0.05)
Cumulative effect of
accounting change --- --- (0.04) ---
$0.36 $0.62 $0.91 $1.15
Diluted Income (Loss)
per share of common
stock:
Continuing operations
before cumulative
effect of accounting
change $0.36 $0.64 $0.95 $1.20
Discontinued operations --- (0.03) --- (0.05)
Cumulative effect of
accounting change --- --- (0.04) ---
$0.36 $0.61 $0.91 $1.15
Cash dividends declared
per share of common
stock $0.20 $0.20 $0.40 $0.40
Weighted average shares
outstanding:
Basic 8,989 9,107 8,982 9,156
Diluted 8,995 9,126 8,989 9,177
Reconciliation of GAAP
to Adjusted Non-GAAP
Operating Income:
(a) Operating income as
reported GAAP $5,100 $9,352 $13,404 $18,009
Expenses (income) for
change in value of
stock performance
rights 342 (599) 898 (857)
Expenses for Federal
investigation 969 --- 2,025 ---
Loss on sale of equipment 806 --- 806 ---
Adjusted non-GAAP
operating income $7,217 $8,753 $17,133 $17,152
The Company believes that the adjusted non-GAAP operating income
comparison above helps investors compare current operating results to
prior periods.
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2006 2005
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents $10,656 $15,467
Accounts receivable, less allowance for
doubtful accounts 60,552 60,102
Inventories 83,269 79,125
Other current assets 9,741 11,870
Discontinued current assets 595 1,462
Total Current Assets 164,813 168,026
Property, plant and equipment, less
allowances for depreciation and amortization 43,019 45,662
Deferred income taxes 20,237 18,212
Goodwill, less accumulated amortization 27,999 27,999
Other assets 20,925 19,322
Discontinued non-current assets 3 3
Total Assets $276,996 $279,224
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $10,579 $9,380
Accrued expenses and other liabilities 32,438 41,495
Discontinued current liabilities 817 1,668
Total Current Liabilities 43,834 52,543
Accrued liability under security bonus plans 24,747 23,866
Other 17,663 17,390
42,410 41,256
Total Stockholders' Equity 190,752 185,425
Total Liabilities and Stockholders' Equity $276,996 $279,224
SOURCE Lawson Products, Inc.
Scott F. Stephens of Lawson Products, Inc., +1-847-827-9666, ext. 2269
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