DES PLAINES, Ill., Oct. 27 /PRNewswire-FirstCall/ -- Lawson Products, Inc. , (the "Company"), an international distributor of services, systems and products to the maintenance, repair and operations ("MRO") and original equipment manufacturing markets ("OEM"), today announced financial results for its third quarter ended September 30, 2006. Net sales for the third quarter increased by 10.4 percent to $129.1 million, from $117.0 million and net income decreased 53.3 percent to $3.1 million from $6.6 million compared to the same period of 2005. Diluted earnings per share were $0.34 for the quarter, a 53.4 percent decrease from $0.73 in the 2005 third quarter.
Third quarter 2006 operating income was $5.6 million compared to $11.1 million in the prior year. The third quarter of 2006 had one less sales day than the prior year quarter. Excluding costs associated with stock performance rights, legal costs associated with the previously disclosed ongoing investigation and severance costs related to operations improvements, adjusted non-GAAP operating income for the third quarter 2006 was $7.2 million compared to $11.0 million in the prior year quarter. "Adjusted non-GAAP operating income" is reconciled to GAAP operating income on the attached income statement. Third quarter 2006 results include the operations of Rutland Tool & Supply Co. (Rutland), which was acquired in December 2005. Rutland accounted for $13.4 million of net sales and $0.4 million of operating income in the third quarter 2006.
"Third quarter operating income was adversely impacted by the termination of a number of independent sales representatives which occurred throughout 2006; nevertheless, we continued to implement marketing, sales and operations initiatives that management believes are important to the Company's future growth and profitability," stated Robert J. Washlow, Chairman and CEO.
The effective tax rate was 47.4 percent for the third quarter 2006 and 38.7 percent in the prior year quarter. The increase in the third quarter 2006 effective tax rate is primarily due to higher state income taxes, resulting from California unitary tax obligations triggered by Rutland's operations in 2006. The company believes that its 2006 full year effective tax rate will approximate the year-to-date September, 2006 effective rate of 42.5 percent.
During the third quarter, the Company announced and initiated a modified "Dutch Auction" self-tender offer for up to 1,000,000 shares, which it completed in early October resulting in the repurchase of 486,493 shares at $43 per share.
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)
(Amounts in Three Months Ended Nine Months Ended
thousands, except September 30, September 30,
per share data) 2006 2005 2006 2005
Net sales $129,125 $116,965 $391,990 $334,580
Cost of goods sold 52,194 42,884 161,001 125,933
Gross profit 76,931 74,081 230,989 208,647
Selling, general and
administrative
expenses 71,311 62,966 211,159 179,523
Loss on sale of
equipment --- --- 806 ---
Operating income (a) 5,620 11,115 19,024 29,124
Investment and other
income 223 102 1,204 608
Interest expense --- (1) --- (7)
Income from continuing
operations before income
taxes and cumulative
effect of accounting
change 5,843 11,216 20,228 29,725
Provision for income
taxes 2,768 4,338 8,587 11,790
Income from continuing
operations before
cumulative effect of
accounting change 3,075 6,878 11,641 17,935
Loss from discontinued
operations, net of
income taxes --- (288) (12) (781)
Income before cumulative
effect of accounting
change 3,075 6,590 11,629 17,154
Cumulative effect of
accounting change,
net of income taxes --- --- (361) ---
Net income $3,075 $6,590 $11,268 $17,154
Basic Income (Loss)
per share of common
stock:
Continuing operations
before cumulative
effect of accounting
change $0.34 $0.76 $1.30 $1.90
Discontinued
operations --- (0.03) --- (0.08)
Cumulative effect of
accounting change --- --- (0.04) ---
$0.34 $0.73 $1.26 $1.82
Diluted Income (Loss)
per share of common
stock:
Continuing operations
before cumulative
effect of accounting
change $0.34 $0.76 $1.29 $1.89
Discontinued
operations --- (0.03) --- (0.08)
Cumulative effect of
accounting change --- --- (0.04) ---
$0.34 $0.73 $1.25 $1.81
Cash dividends declared
per share of common
stock $0.20 $0.20 $0.60 $0.60
Weighted average
shares outstanding:
Basic 8,998 9,018 8,987 9,440
Diluted 9,004 9,035 8,993 9,468
Reconciliation of GAAP
to Adjusted Non-GAAP
Operating Income:
(a) Operating income
as reported GAAP $5,620 $11,115 $19,024 $29,124
Expenses (income) for
change in value of
stock performance
rights 506 (142) 1,403 (999)
Legal expenses for
Federal investigation 528 --- 2,553 ---
Loss on sale of equipment --- --- 806 ---
Severance costs 550 --- 550 ---
Adjusted non-GAAP
operating income $7,204 $10,973 $24,336 $28,125
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
September 30, December 31,
(Amounts in thousands) 2006 2005
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents $20,142 $15,467
Accounts receivable, less
allowance for doubtful accounts 62,673 60,102
Inventories 84,727 79,125
Other current assets 6,309 11,870
Discontinued current assets 603 1,462
Total Current Assets 174,454 168,026
Property, plant and equipment, less
allowances for depreciation and
amortization 42,265 45,662
Deferred income taxes 21,183 18,212
Goodwill, less accumulated
amortization 27,999 27,999
Other assets 21,143 19,322
Discontinued non-current assets 3 3
Total Assets $287,047 $279,224
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $10,559 $9,380
Accrued expenses and other
liabilities 38,844 41,495
Income taxes 1,668 ---
Discontinued current liabilities 827 1,668
Total Current Liabilities 51,898 52,543
Accrued liability under security
bonus plans 25,002 23,866
Other 18,090 17,390
43,092 41,256
Total Stockholders' Equity 192,057 185,425
Total Liabilities and
Stockholders' Equity $287,047 $279,224
