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 June 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.
11,830,614 Shares, $1 par value, as of July 25, 1995.
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<TABLE>
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
(Amounts in thousands) 1995 1994
<CAPTION> ------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
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Current Assets:
Cash and cash equivalents $ 8,195 $ 9,853
Marketable securities 18,364 21,798
Accounts receivable, less
allowance for doubtful accounts 28,216 27,319
Inventories (Note B) 28,612 26,839
Miscellaneous receivables and
prepaid expenses 4,797 5,625
Deferred income taxes 611 815
------------- -------------
Total Current Assets 88,795 92,249
Marketable securities 13,334 26,102
Property, plant and equipment, less
allowances for depreciation and
amortization 35,946 35,858
Investments in real estate 2,942 3,084
Deferred income taxes 2,709 2,461
Other assets 8,937 8,376
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Total Assets $152,663 $168,130
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</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
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<S> <C> <C>
Current Liabilities:
Accounts payable $ 3,015 $ 3,274
Accrued expenses and other liabilities 12,107 14,524
Income taxes 474 2,017
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Total Current Liabilities 15,596 19,815
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Accrued liability under security
bonus plans 10,821 10,163
Other 6,861 6,922
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17,682 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 - 11,862,614 shares;
1994 - 17,097,490 shares) 11,863 17,097
Capital in excess of par value 501 716
Retained earnings 107,916 195,609
Cost of common stock in treasury
1994 - 4,493,676 shares --- (80,884)
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120,280 132,538
Other (895) (1,308)
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Total Stockholders' Equity 119,385 131,230
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Total Liabilities and Stockholders'
Equity $152,663 $168,130
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<FN>
See notes to condensed consolidated financial statements.
</TABLE>
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<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 Six Months Ended
June 30, June 30,
1995 1994 1995 1994
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<S> <C> <C> <C> <C>
Net Sales $ 56,095 $ 53,749 $110,940 $103,521
Investment and other income 515 338 1,541 592
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56,610 54,087 112,481 104,113
--------- --------- --------- ---------
Cost of goods sold (Note B) 15,822 15,302 31,243 29,555
Selling, general and
administrative expenses 32,306 30,558 64,517 59,781
--------- --------- --------- ---------
48,128 45,860 95,760 89,336
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Income before income taxes 8,482 8,227 16,721 14,777
Provision for income taxes 3,205 3,068 6,419 5,550
--------- --------- --------- ---------
Net income 5,277 5,159 10,302 9,227
Retained earnings at
beginning of period 199,152 183,821 195,609 181,381
Deduct:
Treasury stock retired 94,971 --- 94,971 ---
Cash dividends declared 1,542 1,628 3,024 3,256
--------- --------- --------- ---------
Retained earnings at end
of period $107,916 $187,352 $107,916 $187,352
========= ========= ========= =========
Net income per share of
common stock $0.43 $0.38 $0.84 $0.68
===== ===== ===== =====
Cash dividends declared per
share of common stock $0.13 $0.12 $0.25 $0.24
===== ===== ===== =====
Weighted average shares
outstanding 12,217 13,480 12,333 13,515
========= ========= ========= =========
<FN>
See notes to condensed consolidated financial statements.
/TABLE
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<TABLE>
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands)
<CAPTION>
For the
Six months ended
June 30,
1995 1994
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<S> <C> <C>
Operating activities:
Net income $ 10,302 $ 9,227
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,685 1,710
Changes in operating assets and liabilities (7,811) (5,388)
Other 1,091 1,115
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Net Cash Provided by Operating Activities 5,267 6,664
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Investing activities:
Additions to property, plant and equipment (1,760) (3,765)
Purchases of marketable securities (124,563) (121,834)
Proceeds from sale of marketable securities 141,246 125,657
Other 683 25
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Net Cash Provided by Investing Activities 15,606 83
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Financing activities:
Purchases of treasury stock (19,541) (6,323)
Dividends paid (2,995) (3,255)
Other 5 32
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Net Cash Used in Financing Activities (22,531) (9,546)
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Decrease in Cash
and Cash Equivalents (1,658) (2,799)
Cash and Cash Equivalents at Beginning of Period 9,853 17,952
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Cash and Cash Equivalents at End of Period $ 8,195 $ 15,153
========= =========
<FN>
See notes to condensed consolidated financial statements.
/TABLE
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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 June 30, 1995 and the Condensed Consolidated
Statements of Income and Retained Earnings for the three and six month
periods ended June 30, 1995 and 1994 and the Condensed Consolidated
Statements of Cash Flows for the six month periods ended June 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 June 30, 1995 and cost of
goods sold for the six month periods ended June 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 June 30, 1995 and the related
condensed consolidated statements of income and retained earnings for the
three month and six month periods ended June 30, 1995 and 1994 and the
condensed consolidated statements of cash flows for the six month periods
ended June 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
July 21, 1995
Part I
July 21, 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 July 21, 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 June 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
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Part I
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
Cash flows provided by operations for the six months ended June 30, 1995
decreased to $5,267,000 from $6,664,000 in the comparable period of the prior
year. This decline was due primarily to an increase in operating assets and
a decrease in accrued expenses and income taxes payable, which more than offset
higher net income. 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 $1,760,000 and
$3,765,000, respectively, for the six months ended June 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 six months of 1995, the Company
acquired 741,500 shares at a cost of $19,541,000. Also, during the second
quarter of 1995, the Company retired 5,235,176 treasury shares, representing
purchases through June 30, 1995.
Net sales for the three and six month periods ended June 30, 1995, increased
4.4% to $56,095,000 and 7.2% to $110,940,000 relative to the comparable periods
of 1994. The advances are principally the result of gains in both the
average order size and number of orders processed.
Net income for the second quarter advanced 2.3% to $5,277,000 ($.43 per share)
from $5,159,000 ($.38 per share) for the similar period of 1994. This
increase is attributable to the gain in net sales noted above, a slight
improvement in gross margins, and cost containment efforts, which more than
offset a higher effective income tax rate. The income per share increase was
positively impacted by the Company's share repurchase program. Net income for
the six months ended June 30, 1995 rose 11.6% to $10,302,000 ($.84 per share)
from $9,227,000 ($.68 per share) for the comparable period of 1994. In
addition to net life insurance proceeds received during the first quarter of
1995, the reasons for the gain in the six months ended June 30, 1995 are
consistent with those for the second quarter noted above.
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 July 25, 1995 /s/ Bernard Kalish
Bernard Kalish
Chairman of the Board
Dated July 25, 1995 /s/ Joseph L. Pawlick
Joseph L. Pawlick
Vice President and Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 8,195
<SECURITIES> 31,698
<RECEIVABLES> 28,216
<ALLOWANCES> 0
<INVENTORY> 28,612
<CURRENT-ASSETS> 88,795
<PP&E> 35,946
<DEPRECIATION> 0
<TOTAL-ASSETS> 152,663
<CURRENT-LIABILITIES> 15,596
<BONDS> 0
<COMMON> 11,863
0
0
<OTHER-SE> 107,522
<TOTAL-LIABILITY-AND-EQUITY> 152,663
<SALES> 110,940
<TOTAL-REVENUES> 112,481
<CGS> 31,243
<TOTAL-COSTS> 95,760
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 506
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> 16,721
<INCOME-TAX> 6,419
<INCOME-CONTINUING> 10,302
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,302
<EPS-PRIMARY> 0.84
<EPS-DILUTED> 0.84
</TABLE>
