UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
October
31, 2007
Date
of
Report (Date of earliest event reported)
LAWSON
PRODUCTS, INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
0-10546
|
36-2229304
|
||
|
(State
or other jurisdiction of
incorporation)
|
(Commission
File Number)
|
(IRS
Employer Identification
No.)
|
|
1666
East Touhy Avenue, Des Plaines, Illinois
|
60018
|
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(847)
827-9666
(Registrant’s
telephone number, including area code)
N/A
(Former
name or former address, if changed since last report.)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
|
o
|
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
|
|
o
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
o
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
|
|
o
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
|
|
Item
2.02
|
Results
of Operations and Financial
Condition.
|
On
October
31, 2007, Lawson Products, Inc. issued a press release announcing its operating
results for the quarter ended September 30, 2007. A copy of the press release
is
attached as Exhibit 99.1 to this Form 8-K and incorporated herein by
reference.
|
Item
9.01
|
Financial
Statements and Exhibits.
|
(d)
Exhibits.
|
99.1
|
Press
release issued by Lawson Products, Inc. on October 31,
2007.
|
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 hereunto
duly authorized.
|
LAWSON
PRODUCTS, INC.
|
|||
|
(Registrant)
|
|||
|
Dated:
October 31, 2007
|
By:
|
/s/
Neil E. Jenkins
|
|
|
Name:
Neil E. Jenkins
|
|||
|
Title:
Executive Vice President, General Counsel and
Secretary
|
|||
Contact:
Scott F. Stephens
847-827-9666,
ext. 2269
Lawson
Products, Inc. Announces Third Quarter 2007 Results
DES
PLAINES, IL, October 31, 2007 – Lawson Products, Inc. (NASDAQ: LAWS, the
“Company”), a distributor of services, systems and products to the maintenance,
repair and operations (MRO) and original equipment manufacturer (OEM)
marketplaces, today announced financial results for its third quarter ended
September 30, 2007. For the third quarter 2007, net sales from continuing
operations were $127.9 million, an increase of $0.6 million from the comparable
prior year quarter. Net income for the quarter was $2.4 million, compared
to net
income of $3.1 million in the third quarter of 2006. Diluted income per share
was $0.28 for the quarter, compared to income of $0.34 per share a year
ago.
Third
quarter 2007 results include severance costs of $3.7 million related to several
executive departures and re-alignment of the Company’s sales management. The
Company reported operating income of $5.4 million for the quarter compared
to
operating income of $5.8 million in the prior year.
Gross
profit margins for the third quarter 2007 of 59.8 percent were lower compared
to
60.1 percent gross profit margins in the third quarter of 2006. This decrease
was primarily due to higher overall product costs.
Selling,
general and administrative (SG&A) expenses were $67.4 million for the third
quarter of 2007, which represents a decline from the respective prior period
amounts of $70.7 million. Included in SG&A costs are legal costs
associated with the ongoing investigation by the U.S. Attorney’s Office for the
Northern District of Illinois. The Company incurred expenses of $1.2
million for legal costs associated with this investigation in the quarter
ended
September 30, 2007, which represents a $0.6 million increase compared to
$0.6
million in the prior year period.
The
primary driver of lower SG&A in the third quarter 2007 was lower
compensation costs, reflecting a $3.1 million reduction in costs associated
with
the Company’s long-term based incentive plans due to the decline in the
Company’s financial performance in 2007.
The
effective tax rate for the three months ended September 30, 2007 was 53.9
percent, which was higher than the 45.6 percent rate for the three months
ended
September 30, 2006. The higher rate for the third quarter 2007 was related
to
increases to estimated tax liabilities related to the Company’s decision to
exclude tax deductions for expenses associated with the Company’s customer
loyalty programs.
Share
repurchase activities that occurred primarily in 2006 reduced the outstanding
shares of common stock by approximately five percent and had a favorable
impact
on net income per share amounts when compared to the prior year.
Thomas
Neri, President and Chief
Executive Officer said, “In the third quarter, we continued to implement
strategic initiatives that management believes are critical to driving the
Company’s long-term growth and shareholder value. Those initiatives
included actions related to supply chain, sales management, and operations
enhancement activities. In addition, several third quarter 2007
employee departures related to certain initiatives resulted in severance
charges
that negatively impacted our reported financial results for the current
quarter. Despite the negative short-term financial impacts of these
actions, I remain enthusiastic about the opportunities that these initiatives
provide for delivering customer satisfaction and growth for the
Company.”
1
About
Lawson Products, Inc.
Lawson
Products, Inc. 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 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,
2006. 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.
2
LAWSON
PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
(in
thousands, except share data)
|
September
30,
2007
|
December
31,
2006
|
||||||
|
ASSETS
|
||||||||
|
Current
Assets:
|
||||||||
|
Cash
and cash equivalents
|
$ |
1,664
|
$ |
3,391
|
||||
|
Accounts
receivable, less allowance for doubtful accounts
|
62,577
|
60,411
|
||||||
|
Inventories
|
91,008
|
90,272
|
||||||
|
Miscellaneous
receivables and prepaid expenses
|
7,970
|
5,529
|
||||||
|
Deferred
income taxes
|
3,098
|
3,538
|
||||||
|
Discontinued
current assets
|
1,171
|
2,056
|
||||||
|
Total
Current Assets
|
167,488
|
165,197
|
||||||
|
Property,
plant and equipment, less allowances for depreciation and
amortization
|
50,656
|
42,664
|
||||||
|
Deferred
income taxes
|
22,803
|
20,341
|
||||||
|
Goodwill
|
27,999
|
27,999
|
||||||
|
Other
assets
|
24,644
|
22,679
|
||||||
|
Discontinued
non-current assets
|
—
|
3
|
||||||
|
Total
Assets
|
$ |
293,590
|
$ |
278,883
|
||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Current
Liabilities:
|
||||||||
|
Revolving
line of credit
|
$ |
13,000
|
$ |
—
|
||||
|
Accounts
payable
|
15,038
|
14,055
|
||||||
|
Accrued
expenses and other liabilities
|
46,343
|
46,746
|
||||||
|
Income
taxes
|
—
|
855
|
||||||
|
Discontinued
current liabilities
|
1,065
|
1,770
|
||||||
|
Total
Current Liabilities
|
75,446
|
63,426
|
||||||
|
Accrued
liability under security bonus plans
|
26,549
|
25,522
|
||||||
|
Other
|
20,037
|
19,618
|
||||||
|
46,586
|
45,140
|
|||||||
|
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-(2007-8,522,001 shares; 2006-8,521,001
shares)
|
8,522
|
8,521
|
||||||
|
Capital
in excess of par value
|
4,774
|
4,749
|
||||||
|
Retained
earnings
|
158,301
|
158,008
|
||||||
|
Accumulated
other comprehensive loss
|
(39 | ) | (961 | ) | ||||
|
Total
Stockholders’ Equity
|
171,558
|
170,317
|
||||||
|
Total
Liabilities and Stockholders’ Equity
|
$ |
293,590
|
$ |
278,883
|
||||
3
LAWSON
PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
|
(in
thousands, except per share data)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
|
Net
sales
|
$ |
127,913
|
$ |
127,335
|
$ |
386,760
|
$ |
386,727
|
||||||||
|
Cost
of goods sold
|
51,456
|
50,786
|
157,779
|
156,974
|
||||||||||||
|
Gross
profit
|
76,457
|
76,549
|
228,981
|
229,753
|
||||||||||||
|
Operating
expenses:
|
||||||||||||||||
|
Selling,
general and administrative expenses
|
67,435
|
70,740
|
205,124
|
209,620
|
||||||||||||
|
Severance
and other charges
|
3,659
|
—
|
10,571
|
—
|
||||||||||||
|
Loss
on sale of equipment
|
—
|
—
|
—
|
806
|
||||||||||||
|
Operating
income
|
5,363
|
5,809
|
13,286
|
19,327
|
||||||||||||
|
Investment
and other income
|
160
|
260
|
555
|
1,201
|
||||||||||||
|
Interest
expense
|
(295 | ) |
—
|
(662 | ) |
—
|
||||||||||
|
Income
from continuing operations before income taxes and cumulative
effect of
accounting change
|
5,228
|
6,069
|
13,179
|
20,528
|
||||||||||||
|
Provision
for income taxes
|
2,818
|
2,768
|
6,063
|
8,587
|
||||||||||||
|
Income
from continuing operations before cumulative effect of accounting
change
|
2,410
|
3,301
|
7,116
|
11,941
|
||||||||||||
|
Loss
from discontinued operations, net of income taxes
|
(11 | ) | (226 | ) | (496 | ) | (312 | ) | ||||||||
|
Income
before cumulative effect of accounting change
|
2,399
|
3,075
|
6,620
|
11,629
|
||||||||||||
|
Cumulative
effect of accounting change, net of income taxes
|
—
|
—
|
—
|
(361 | ) | |||||||||||
|
Net
income
|
$ |
2,399
|
$ |
3,075
|
$ |
6,620
|
$ |
11,268
|
||||||||
|
Basic
income (loss) per share of common stock:
|
||||||||||||||||
|
Continuing
operations before cumulative effect of accounting change
|
$ |
0.28
|
$ |
0.37
|
$ |
0.84
|
$ |
1.33
|
||||||||
|
Discontinued
operations
|
(0.00 | ) | (0.03 | ) | (0.06 | ) | (0.03 | ) | ||||||||
|
Cumulative
effect of accounting change
|
—
|
—
|
—
|
(0.04 | ) | |||||||||||
| $ |
0.28
|
$ |
0.34
|
$ |
0.78
|
$ |
1.25
|
|||||||||
|
Diluted
income (loss) per share of common stock:
|
||||||||||||||||
|
Continuing
operations before cumulative effect of accounting change
|
$ |
0.28
|
$ |
0.37
|
$ |
0.83
|
$ |
1.33
|
||||||||
4
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
|
(in
thousands, except per share data)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
|
Discontinued
operations
|
(0.00 | ) | (0.03 | ) | (0.06 | ) | (0.03 | ) | ||||||||
|
Cumulative
effect of accounting change
|
—
|
—
|
—
|
(0.04 | ) | |||||||||||
| $ |
0.28
|
$ |
0.34
|
$ |
0.78
|
$ |
1.25
|
|||||||||
|
Cash
dividends declared per share of common stock
|
$ |
0.20
|
$ |
0.20
|
$ |
0.60
|
$ |
0.60
|
||||||||
|
Weighted
average shares outstanding:
|
||||||||||||||||
|
Basic
|
8,522
|
8,998
|
8,522
|
8,987
|
||||||||||||
|
Diluted
|
8,524
|
9,004
|
8,524
|
8,993
|
||||||||||||
5