Lawson Products, Inc. Announces Third Quarter 2009 Results

http://www.businesswire.com/news/home/20091028006538/en

Company sees sales stabilize and earns $0.18 per share
DES PLAINES, Ill.--(Business Wire)--
Lawson Products, Inc. (NASDAQ:LAWS) (the "Company"), a distributor of services,
systems and products to the MRO and OEM marketplaces, today announced third
quarter results for the period ended September 30, 2009.

Third Quarter 2009 Highlights:

* Net sales for the quarter were $95.1 million;
* Operating income for the quarter was $2.9 million;
* Net income for the quarter was $1.5 million or $0.18 per share;
* Net cash provided by operating activities pre settlement payment was $5.7
million;
* At September 30, 2009, cash on hand of $10.8 million and no debt;
* During the quarter, the company doubled its dividend to $0.06 per share.

Net sales for the third quarter of 2009 were $95.1 million, a 24.1% decrease
compared to net sales of $125.4 million for the prior year period, reflecting
reduced customer demand due to current economic conditions. Gross profit
decreased to $56.4 million in the third quarter of 2009, a $14.7 million decline
from the year ago quarter. Gross profit margin for the third quarter of 2009
increased to 59.3% compared to 56.7% in the third quarter of 2008. The margin
improvement was due to improvements in the OEM gross margin along with an
increase in the proportion of total sales generated by the higher margin MRO
segment. Selling, general and administrative expenses decreased by 17.2% to
$52.8 million as compared to $63.8 million in the third quarter 2008.

Operating income for the third quarter of 2009 was $2.9 million compared to
operating income of $5.8 million in 2008. The Company reported net income of
$1.5 million or $0.18 per share in the third quarter of 2009 compared to $3.1
million or $0.36 per share in the third quarter of 2008.

Net sales for the nine month period ended September 30, 2009, were $289.5
million, a 23.5% decrease compared to net sales of $378.4 million for the prior
year period. Gross profit decreased to $166.4 million for the first nine months
of 2009, a $52.2 million decline from the year ago period. Gross profit margin
was 57.5% for the first nine months of 2009 as compared to 57.8% for the
comparable period in 2008.

The operating loss for the first nine months of 2009 was $2.7 million compared
to a loss of $15.4 million in 2008. Settlement and related costs, severance and
unclaimed property charges, totaled $6.7 million in 2009 and $39.2 million in
2008. Excluding the effect of these charges, adjusted operating income for the
first nine months of 2009 was $4.1 million as compared to adjusted operating
income of $23.8 million in 2008. The Company reported a net loss of $2.6 million
or $0.30 per share of common stock in the first nine months of 2009, which
compared to a net loss of $22.2 million or $2.61 per share in the first nine
months of 2008.

Thomas Neri, President and Chief Executive Officer commented, "We are pleased
with our progress to date. Overall, we have seen our sales stabilize, with our
MRO segment performing slightly better than our OEM segment. In addition, our
gross margins have improved sequentially in the second and third quarters. By
implementing a number of cost reduction initiatives earlier this year, primarily
in the MRO segment, we have succeeded in establishing a much lower fixed cost
structure to support our future operations. Further, we entered into a new
credit agreement during the quarter which provides us with greater financial
flexibility."

Mr. Neri concluded, "We are deeply committed to becoming a much more efficient
organization capable of delivering greater value to our customers and
shareholders. While we have worked hard to reduce costs and improve our
productivity, we believe there are still substantial improvements available."

About Lawson Products, Inc.

Lawson Products, headquartered in Des Plaines, IL, 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, and provides services and systems to original equipment manufacturers
(OEMs).

This Release contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 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.
These statements are based on management`s current expectations, intentions or
beliefs and are subject to a number of factors, assumptions and uncertainties
that could cause or contribute to such differences or that might otherwise
impact the business include the risk factors set forth in Item 1A of the
December 31, 2008 Form 10-K filed on March 11, 2009. The Company undertakes no
obligation to update any such factor or to publicly announce the results of any
revisions to any forward-looking statements whether as a result of new
information, future events or otherwise.

LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008

Net sales $ 95,125 $ 125,364 $ 289,539 $ 378,382
Cost of goods sold 38,728 54,275 123,106 159,721
Gross profit 56,397 71,089 166,433 218,661

Operating expenses:
Selling, general and administrative expenses 52,845 63,791 162,367 194,910
Severance and other 659 1,144 6,622 7,617
Settlement and related costs 23 394 114 31,562
Operating income (loss) 2,870 5,760 (2,670 ) (15,428 )

Other income 110 55 886 328
Interest expense (132 ) (247 ) (474 ) (690 )

Income (loss) from continuing operations before income taxes 2,848 5,568 (2,258 ) (15,790 )

Income tax expense 1,327 2,500 244 5,853

Income (loss) from continuing operations 1,521 3,068 (2,502 ) (21,643 )

(Loss) income from discontinued operations, net of income taxes (18 ) 10 (96 ) (563 )

Net income (loss) $ 1,503 $ 3,078 $ (2,598 ) $ (22,206 )

Basic and diluted income (loss) per share of common stock:
Continuing operations $ 0.18 $ 0.36 $ (0.29 ) $ (2.54 )
Discontinued operations - - (0.01 ) (0.07 )
$ 0.18 $ 0.36 $ (0.30 ) $ (2.61 )

Cash dividends declared per share of $ 0.06 $ 0.20 $ 0.12 $ 0.60
common stock

Basic weighted average shares outstanding: 8,522 8,522 8,522 8,522

Diluted weighted average shares outstanding: 8,522 8,523 8,522 8,522

LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)

September 30, December 31,
2009 2008
(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents $ 10,796 $ 4,300
Accounts receivable, less allowance for doubtful accounts 42,098 48,634
Inventories 78,466 86,435
Miscellaneous receivables and prepaid expenses 13,567 11,812
Deferred income taxes 4,118 6,127
Property held for sale 332 -
Discontinued current assets 449 296

Total current assets 149,826 157,604

Property, plant and equipment, less accumulated 43,023 47,783
depreciation and amortization

Cash value of life insurance 16,487 17,970
Deferred income taxes 15,219 18,159
Goodwill 27,839 25,748
Other 3,623 3,732

Total assets $ 256,017 $ 270,996

LIABILITIES AND STOCKHOLDERS` EQUITY

Current liabilities:
Accounts payable $ 19,006 $ 16,334
Settlement payable - current 15,000 10,000
Accrued expenses and other liabilities 35,554 41,205
Discontinued current liabilities - 53

Total current liabilities 69,560 67,592

Revolving line of credit $ - $ 7,700
Security bonus plans 25,960 26,218
Deferred compensation 13,076 11,301
Settlement payable - noncurrent - 10,000
Other 10,324 9,441
49,360 64,660

Total Stockholders` Equity 137,097 138,744

Total liabilities and stockholders` equity $ 256,017 $ 270,996

LAWSON PRODUCTS, INC. AND SUBSIDIARIES
REGULATION G GAAP RECONCILIATIONS

The Company reports its financial results in accordance with U.S. generally
accepted accounting principles (GAAP). However, the Company`s management
believes that certain non-GAAP financial measures may provide users of this
financial information additional meaningful comparisons between current results
and results in prior operating periods. Management believes that these non-GAAP
financial measures can provide additional meaningful reflection of underlying
trends of the business because they provide a comparison of historical
information that excludes certain infrequently occurring or non-operational
items that impact the overall comparability. See the table below for
supplemental financial data and corresponding reconciliations to GAAP financial
measures for the three months and nine months ended September 30, 2009 and 2008.
Non-GAAP financial measures should be viewed in addition to, and not as an
alternative for, the Company`s reported results prepared in accordance with
GAAP.

TABLE 1 - RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP OPERATING INCOME (LOSS)
(Amounts in thousands)
(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008

Operating income (loss), as reported per GAAP $ 2,870 $ 5,760 $ (2,670 ) $ (15,428 )
Severance and other 659 794 6,622 3,667
Settlement penalty (1) - - - 30,000
Settlement related costs (2) 23 394 114 1,562
Unclaimed property charges (3) - 350 - 3,950

Adjusted non-GAAP operating income $ 3,552 $ 7,298 $ 4,066 $ 23,751

(1) Provision for penalties in connection with the settlement of the
investigation by the U.S. Attorney's Office for the Northern District of
Illinois.

(2) Legal and other related expenses associated with the investigation by the
U.S. Attorney's Office for the Northern District of Illinois.

(3) Unclaimed property charges relate primarily to years prior to 2003.

TABLE 2 - RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP NET CASH
PROVIDED BY OPERATING ACTIVITIES BEFORE SETTLEMENT PAYMENT
(Amounts in thousands)
(Unaudited)

Three Months Ended
September 30, 2009

Net cash provided by operating activities per GAAP $ 689
Settlement payment (4) 5,000

Adjusted non-GAAP net cash provided by operating activities before settlement payment $ 5,689

(4) Payment made in connection with the settlement of the investigation by the
U.S. Attorney's Office for the Northern District of Illinois.

Lawson Products, Inc.
F. Terrence Blanchard
847-827-9666, ext. 2269

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