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Lawson Products Inc. Reports Operating Results (10-Q)

October 28, 2009 | About:
10qk

10qk

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Lawson Products Inc. (LAWS) filed Quarterly Report for the period ended 2009-09-30.

Lawson Products Inc. is a distributor of expendable maintenance repair & replacement products. It also distributes production components to the O.E.M. marketplace. These products may be divided into 3 broad categories: Fasteners Fittings & Related Parts such as screws nuts & other fasteners; Industrial Supplies such as hoses lubricants adhesives & other chemicals as well as files drills & other shop supplies; & Automotive & Equipment Maintenance Parts such as primary wiring connectors & other electrical supplies exhaust & other automotive parts. Lawson Products Inc. has a market cap of $150.5 million; its shares were traded at around $17.67 with a P/E ratio of 441.8 and P/S ratio of 0.3. The dividend yield of Lawson Products Inc. stocks is 1.4%. Lawson Products Inc. had an annual average earning growth of 0.2% over the past 10 years.

Highlight of Business Operations:

The sales decline was reflected in both the MRO and the OEM segments. MRO net sales decreased $22.1 million or 21.4% in the third quarter of 2009, to $81.4 million from $103.5 million in the prior year period. OEM net sales decreased $8.1 million or 37.1% in the third quarter of 2009, to $13.8 million from $21.9 million in the prior year period.

SG&A expenses were $52.8 million or 55.6% of net sales and $63.8 million or 50.9% of net sales for the quarters ended September 30, 2009 and 2008, respectively. The $11.0 million reduction in the third quarter of 2009 reflects a $5.5 million reduction in sales agent compensation, $2.0 million in employeee compensation and $3.5 million in other cost reduction initiatives. SG&A as a percent of net sales increased 4.7 percentage points in the third quarter of 2009 compared to the third quarter of 2008 as fixed costs were not reduced in proportion to the overall decrease in net sales.

The sales decline was reflected in both the MRO and the OEM segments. MRO net sales decreased $69.8 million or 22.2% in the first nine months of 2009, to $244.7 million from $314.5 million in the prior year period. OEM net sales decreased $19.1 million or 29.9% in the first nine months of 2009, to $44.8 million from $63.9 million in the prior year period.

Gross profit decreased $52.3 million in the first nine months of 2009, to $166.4 million from $218.7 million in the prior year period. The gross profit margin for the first nine months of 2009 was 57.5%, 0.3 percentage points lower than the 57.8% achieved in the first nine months of 2008. MRO gross profit decreased $49.7 million in the first nine months of 2009, to $158.6 million from $208.3 million in the prior year period. MRO gross profit as a percent of net sales decreased to 64.8% for the first nine months of 2009 from 66.2% in the first nine months of 2008. The 2008 gross margin included a $2.4 million favorable inventory reserve adjustment. Excluding the 2008 inventory adjustment, gross profit as a percent of net sales decreased by 0.7 percentage points in the first nine months of 2009 compared to 2008 primarily due to an increasingly competitive pricing environment, a change in the sales mix to lower margin products and an increase in inventory reserves earlier in the year. The year over year gross margin decline experienced in the first quarter has been somewhat mitigated by year over year improvements in the gross margin percentage during the second and third quarters.

SG&A expenses were $162.4 million or 56.1% of net sales and $194.9 million or 51.5% of net sales for the nine months ended September 30, 2009 and 2008, respectively. The $32.5 million reduction in the first nine months of 2009 reflects a $16.2 million reduction in sales agent compensation, $3.9 million in employee compensation and $12.4 million in other cost reduction initiatives. SG&A as a percent of net sales increased 4.6 percentage points in the first nine months of 2009 compared to the first nine months of 2008 as fixed costs were not reduced in proportion to the overall decrease in net sales.

Capital expenditures were $2.4 million and $2.7 million for the first nine months of 2009 and 2008, respectively. During 2009, we sold our previously discontinued Charlotte, North Carolina distribution center. We received proceeds of $2.2 million in cash and recorded a gain of $0.4 million on the transaction. Net cash used for financing activities in the first nine months of 2009 was $10.3 million compared to $5.6 million in the first nine months of 2008, primarily reflecting the $7.7 million pay down of all of the outstanding balance of our revolving line of credit.

Read the The complete ReportLAWS is in the portfolios of Arnold Van Den Berg of Century Management.

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10qk
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