SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-Q
Quarterly Report under Section 13 or 15(d) of
The Securities Exchange Act of 1934
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For Quarter Ended Sept 30, 1995 Commission file no. 0-10546
LAWSON PRODUCTS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 36-2229304
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1666 East Touhy Avenue, Des Plaines, Illinois 60018
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(Address of principal executive offices) (Zip Code)
Registrant's telephone no., including area code: (708) 827-9666
Not applicable
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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.
11,765,114 Shares, $1 par value, as of October 20, 1995.<PAGE>
<PAGE>
<TABLE>
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
(Amounts in thousands) 1995 1994
<CAPTION> ------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
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Current Assets:
Cash and cash equivalents $ 9,202 $ 9,853
Marketable securities 24,025 21,798
Accounts receivable, less
allowance for doubtful accounts 28,800 27,319
Inventories (Note B) 27,312 26,839
Miscellaneous receivables and
prepaid expenses 5,466 5,625
Deferred income taxes 646 815
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Total Current Assets 95,451 92,249
Marketable securities 10,635 26,102
Property, plant and equipment, less
allowances for depreciation and
amortization 35,628 35,858
Investments in real estate 3,016 3,084
Deferred income taxes 2,865 2,461
Other assets 8,968 8,376
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Total Assets $156,563 $168,130
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</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
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<S> <C> <C>
Current Liabilities:
Accounts payable $ 2,570 $ 3,274
Accrued expenses and other liabilities 13,840 14,524
Income taxes 513 2,017
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Total Current Liabilities 16,923 19,815
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Accrued liability under security
bonus plans 11,087 10,163
Other 7,225 6,922
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18,312 17,085
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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 - (1995 - 11,797,114 shares;
1994 - 17,097,490 shares) 11,797 17,097
Capital in excess of par value 498 716
Retained earnings 109,790 195,609
Cost of common stock in treasury
1994 - 4,493,676 shares --- (80,884)
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122,085 132,538
Other (757) (1,308)
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Total Stockholders' Equity 121,328 131,230
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Total Liabilities and Stockholders'
Equity $156,563 $168,130
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<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
(Amounts in thousands, except per share data)
<CAPTION>
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales $ 56,177 $ 55,539 $167,117 $159,060
Investment and other income 462 217 2,003 809
--------- --------- --------- ---------
56,639 55,756 169,120 159,869
--------- --------- --------- ---------
Cost of goods sold (Note B) 15,832 15,847 47,075 45,402
Selling, general and
administrative expenses 32,368 31,219 96,885 91,001
--------- --------- --------- ---------
48,200 47,066 143,960 136,403
--------- --------- --------- ---------
Income before income taxes 8,439 8,690 25,160 23,466
Provision for income taxes 3,348 3,443 9,767 8,993
--------- --------- --------- ---------
Net income 5,091 5,247 15,393 14,473
Retained earnings at
beginning of period 107,916 187,352 195,609 181,381
Deduct:
Treasury stock retired 1,683 --- 96,654 ---
Cash dividends declared 1,534 1,528 4,558 4,783
--------- --------- --------- ---------
Retained earnings at end
of period $109,790 $191,071 $109,790 $191,071
========= ========= ========= =========
Net income per share of
common stock $0.43 $0.40 $1.26 $1.08
===== ===== ===== =====
Cash dividends declared per
share of common stock $0.13 $0.12 $0.38 $0.36
===== ===== ===== =====
Weighted average shares
outstanding 11,826 13,107 12,177 13,374
========= ========= ========= =========
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands)
<CAPTION>
For the
Nine months ended
September 30,
1995 1994
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<S> <C> <C>
Operating activities:
Net income $ 15,393 $ 14,473
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,527 2,570
Changes in operating assets and liabilities (6,722) (5,620)
Other 2,090 2,393
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Net Cash Provided by Operating Activities 13,288 13,816
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Investing activities:
Additions to property, plant and equipment (2,280) (5,545)
Purchases of marketable securities (184,507) (193,338)
Proceeds from sale of marketable securities 197,988 197,607
Other 684 70
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Net Cash Provided by/(Used in) Investing Activities 11,885 (1,206)
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Financing activities:
Purchases of common stock (21,292) (12,955)
Dividends paid (4,537) (4,783)
Other 5 32
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Net Cash Used in Financing Activities (25,824) (17,706)
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Decrease in Cash
and Cash Equivalents (651) (5,096)
Cash and Cash Equivalents at Beginning of Period 9,853 17,952
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Cash and Cash Equivalents at End of Period $ 9,202 $ 12,856
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<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
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, 1994. The Condensed Consolidated
Balance Sheet as of September 30, 1995 and the Condensed
Consolidated Statements of Income and Retained Earnings for the
three and nine month periods ended September 30, 1995 and 1994
and the Condensed Consolidated Statements of Cash Flows for the
nine month periods ended September 30, 1995 and 1994 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 finished goods) at September 30,
1995 and cost of goods sold for the nine month periods ended
September 30, 1995 and 1994 were determined through the use of
estimated gross profit rates.
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.
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, 1995 and the related condensed consolidated statements of
income and retained earnings for the three month and nine month
periods ended September 30, 1995 and 1994 and the condensed
consolidated statements of cash flows for the nine month periods
ended September 30, 1995 and 1994. 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, 1994, and the related
consolidated statements of income and retained earnings and cash
flows for the year then ended, not presented herein, and in our
report dated February 23, 1995, 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, 1994, is fairly
stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
ERNST & YOUNG LLP
October 20, 1995
Part I
October 20, 1995
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 20,
1995 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, 1995.
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
Part I
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
Cash flows provided by operations for the nine months ended
September 30, 1995 decreased to $13,288,000 from $13,816,000 in
the comparable period of the prior year. This decline was due
primarily to an increase in operating assets and a decrease in
operating liabilities, which more than offset higher net income.
In addition to satisfying operating requirements, 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
$2,280,000 and $5,545,000, respectively, for the nine months
ended September 30, 1995 and 1994. Capital expenditures during
1995 and 1994 include the construction of a Lawson outbound
facility in Addison, Illinois, which was substantially completed
by the end of 1994, at a cost of approximately of $5,600,000.
This facility opened during the first quarter of 1995.
At December 31, 1994, the Company was authorized to purchase up
to 1,000,000 shares of its common stock. During the first nine
months of 1995, the Company acquired 807,000 shares at a cost of
$21,292,000. Also, during the nine month period ending September
30, 1995, the Company retired 5,300,676 treasury shares,
representing cumulative purchases through September 30, 1995.
Net sales for the three and nine month periods ended September
30, 1995, gained 1.1% to $56,177,000 and 5.1% to $167,117,000
relative to the comparable periods of 1994. The increases are
principally the result of gains in the average order size, which
more than offset a slight decline in the number of orders
processed.
Net income for the third quarter decreased 3.0% to $5,091,000
($.43 per share) from $5,247,000 ($.40 per share) for the similar
period of 1994 as the sales gain was not sufficient to offset
higher operating expenses in the quarter. Net income for the
nine months ended September 30, 1995 advanced 6.4% to $15,393,000
($1.26 per share) from $14,473,000 ($1.08 per share) for the
comparable period of 1994. This increase is attributable to the
gain in net sales noted above, a slight improvement in gross
margins, net life insurance proceeds received during the first
quarter of 1995, and cost containment efforts, which more than
offset a higher effective income tax rate. The increases in
income per share for the three and nine month periods of 1995
were positively impacted by the Company's share repurchase
program.
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 9, 1995.
(b) Not applicable.
(c) Set forth below is the tabulation of the votes on
each nominee for election as a director:
Withheld
For Authority
Bernard Kalish 12,171,036 21,761
Sidney L. Port 12,166,387 26,410
(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.
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 20, 1995 /s/ Bernard Kalish
Bernard Kalish
Chairman of the Board
Dated October 20, 1995 /s/ Joseph L. Pawlick
Joseph L. Pawlick
Vice President and Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 9,202
<SECURITIES> 34,660
<RECEIVABLES> 28,800
<ALLOWANCES> 0
<INVENTORY> 27,312
<CURRENT-ASSETS> 95,451
<PP&E> 35,628
<DEPRECIATION> 0
<TOTAL-ASSETS> 156,563
<CURRENT-LIABILITIES> 16,923
<BONDS> 0
<COMMON> 11,797
0
0
<OTHER-SE> 109,531
<TOTAL-LIABILITY-AND-EQUITY> 156,563
<SALES> 167,117
<TOTAL-REVENUES> 169,120
<CGS> 47,075
<TOTAL-COSTS> 143,960
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 760
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> 25,160
<INCOME-TAX> 9,767
<INCOME-CONTINUING> 15,393
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,393
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.26
</TABLE>
