Lawson Products Inc. Reports Operating Results (10-Q)
Lawson Products Inc. has a market cap of $138.5 million; its shares were traded at around $16.25 with a P/E ratio of 25.7 and P/S ratio of 0.4. The dividend yield of Lawson Products Inc. stocks is 1.5%.LAWS is in the portfolios of Arnold Van Den Berg of Century Management, Chuck Royce of Royce& Associates.
Highlight of Business Operations:MRO net sales decreased $3.2 million or 3.9% in the first quarter of 2010, to $79.6 million from $82.8 million in the prior year period. OEM net sales decreased $1.1 million or 6.7% in the first quarter of 2010, to $15.5 million from $16.6 million in the prior year period.
OEM gross profit increased $1.1 million in the first quarter of 2010, to $3.7 million from $2.6 million in the prior year period. Gross profit as a percent of net sales increased to 24.2% for the first quarter of 2010, 8.5 percentage points higher than 15.7% achieved in the first quarter of 2009. The improved margin was due primarily to renegotiating customer contracts to provide an acceptable rate of return and not renewing contracts with low rates of return.
Income tax expense of $2.2 million was recorded based on pre-tax income of $4.6 million for the three months ended March 31, 2010, resulting in an effective tax rate of 48.7%. For the three months ended March 31, 2009, the Company recorded $2.4 million income tax benefit, based on a pre-tax loss from continuing operations of $8.3 million, resulting in an effective tax rate of 28.8%. The primary reason for the lower tax rate in 2009 was due to non-deductible expenses, which reduced the effective tax rate on the loss.
Net cash used in continuing operations was $1.1 million for the first three months of 2010 compared to $1.7 million provided by continuing operations in the first three months of 2009. In 2010, accounts receivable and inventory increased $4.4 million and $1.3 million, respectively, as a result of increased sales in the first quarter of 2010 compared to the fourth quarter of 2009. Cash provided from operations in the first quarter of 2009 reflected a lower operating profit offset by a decrease in accounts receivable and lower inventory levels.
Cash flows from investing activities in the first quarter of 2010 benefited from the receipt of $2.0 million from the sale of our Dallas, Texas distribution center. Capital expenditures were $0.3 million for the first three months of 2010 compared to $1.2 million in 2009. During the first quarter of 2010, we selected our Enterprise Resource Planning (ERP) system provider and we anticipate that the total cost, including hardware, software, data conversion and other implementation expenditures, will range from $15 million to $20 million and will commence in the second quarter of 2010 and continue through 2011.
Net cash used to support financing activities in the first three months of 2010 was $0.5 million compared to $3.5 million provided by financing activities in the first three months of 2009. The $4.0 change was primarily due to net borrowings of $5.3 million on our revolving line of credit in the first quarter of 2009 partially offset by a lower dividend payment of $0.06 per share in the first quarter of 2010 compared to the dividend payment of $0.20 per share in 2009.
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