| Exhibit 99.1 |
Press Release | Source: Lawson Products, Inc. |
Lawson Products, Inc. Announces Third Quarter 2006 Results
Friday October 27, 5:52 pm ET
DES PLAINES, Ill., Oct. 27 /PRNewswire-FirstCall/ -- Lawson Products, Inc. (Nasdaq: LAWS - News), (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 |