UNITED STATES
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, 2001 Commission file no. 0-10546
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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 Identification No.)
incorporation or organization)
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: (847) 827-9666
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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. 9,704,757 SHARES, $1
PAR VALUE, AS OF JULY 17, 2001.
PART I - FINANCIAL INFORMATION
ITEM 2 FINANCIAL STATEMENTS
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) JUNE 30, DECEMBER 31,
2001 2000
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(UNAUDITED)
ASSETS
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Current Assets:
Cash and cash equivalents $ 1,993 $ 7,912
Marketable securities 6,018 29,973
Accounts receivable, less allowance for doubtful accounts 50,934 40,823
Inventories (Note B) 63,672 55,228
Miscellaneous receivables and prepaid expenses 11,947 9,356
Deferred income taxes 1,926 1,857
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Total Current Assets 136,490 145,149
Marketable securities --- 401
Property, plant and equipment, less allowances for depreciation and
amortization
40,284 39,405
Investments in real estate 845 705
Deferred income taxes 9,686 9,212
Goodwill, less accumulated amortization 30,525 2,431
Other assets 27,482 25,418
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Total Assets $ 245,312 $ 222,721
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities:
Revolving line of credit $ 23,400 $ ---
Accounts payable 8,636 6,730
Accrued expenses and other liabilities 18,695 24,518
Income taxes 788 2,615
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Total Current Liabilities 51,519 33,863
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Accrued liability under security bonus plans 18,611 17,968
Other 11,271 10,978
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29,882 28,946
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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 and outstanding-(2001-9,710,157 shares; 2000-9,706,404 shares) 9,710 9,706
Capital in excess of par value 878 762
Retained earnings 155,141 151,066
Accumulated other comprehensive income (1,818) (1,622)
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Total Stockholders' Equity 163,911 159,912
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Total Liabilities and Stockholders' Equity $ 245,312 $ 222,721
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See notes to condensed consolidated financial statements.
-2-
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
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2001 2000 2001 2000
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Net sales $ 98,980 $ 89,632 $ 182,630 $ 175,912
Cost of goods sold (Note B) 33,888 30,458 63,825 60,404
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Gross profit 65,092 59,174 118,805 115,508
Selling, general and administrative expenses 58,214 48,334 106,845 94,323
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Operating income 6,878 10,840 11,960 21,185
Investment and other income 303 541 1,046 1,107
Interest expense 254 0 254 3
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Income before income taxes 6,927 11,381 12,752 22,289
Provision for income taxes 2,939 4,664 5,526 9,127
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Net income $ 3,988 $ 6,717 $ 7,226 $ 13,162
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Net income per share of common stock:
Basic $ 0.41 $ 0.68 $ 0.74 $ 1.32
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Diluted $ 0.41 $ 0.68 $ 0.74 $ 1.32
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Cash dividends declared per share of
common stock $ 0.16 $ 0.15 $ 0.32 $ 0.30
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Weighted average shares outstanding:
Basic 9,711 9,895 9,710 9,991
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Diluted 9,740 9,908 9,736 10,000
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See notes to condensed consolidated financial statements.
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LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
FOR THE
SIX MONTHS ENDED
JUNE 30,
2001 2000
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Operating activities:
Net income $ 7,226 $ 13,162
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 3,864 3,091
Changes in operating assets and liabilities (24,497) (8,533)
Other 688 404
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Net Cash Provided by (Used in) Operating Activities (12,719) 8,124
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Investing activities:
Additions to property, plant and equipment (3,755) (1,764)
Purchases of marketable securities (9,219) (24,769)
Proceeds from sale of marketable securities 33,586 27,904
Acquisition of IPD and Kent Automotive (34,378) ---
Other 100 100
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Net Cash Provided by (Used in) Investing Activities (13,666) 1,471
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Financing activities:
Purchases of treasury stock (46) (10,752)
Proceeds from revolving line of credit 23,400 ---
Dividends paid (3,010) (2,963)
Other 122 84
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Net Cash Provided by (Used in) Financing Activities 20,466 (13,631)
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Decrease in Cash and Cash Equivalents (5,919) (4,036)
Cash and Cash Equivalents at Beginning of Period 7,912 11,975
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Cash and Cash Equivalents at End of Period $ 1,993 $ 7,939
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See notes to condensed consolidated financial statements.
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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 Lawson Products, Inc.'s (the
"Company") Annual Report on Form 10-K for the year ended December 31, 2000. The
Condensed Consolidated Balance Sheet as of June 30, 2001, the Condensed
Consolidated Statements of Income for the three and six month periods ended June
30, 2001 and 2000 and the Condensed Consolidated Statements of Cash Flows for
the six month periods ended June 30, 2001 and 2000 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. Operating results for the three and six month periods
ended June 30, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001.
B) Inventories (consisting of primarily finished goods) at June 30, 2001 and
cost of goods sold for the three and six month periods ended June 30, 2001 and
2000 were determined through the use of estimated gross profit rates. The
difference between actual and estimated gross profit is adjusted in the fourth
quarter. In 2000, this adjustment increased net income by approximately
$1,349,000.
C) Total comprehensive income and its components, net of related tax, for the
first three and six months of 2001 and 2000 are as follows (in thousands):
THREE MONTHS ENDED
JUNE 30,
2001 2000
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Net income $ 3,988 $ 6,717
Unrealized gain on marketable securities - 15
Foreign currency translation adjustments 378 (319)
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Comprehensive income $ 4,366 $ 6,413
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SIX MONTHS ENDED
JUNE 30,
2001 2000
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Net income $ 7,226 $ 13,162
Unrealized gain on marketable securities - 11
Foreign currency translation adjustments (196) (438)
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Comprehensive income $ 7,030 $ 12,735
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The components of accumulated other comprehensive income, net of related tax, at
June 30, 2001 and December 31, 2000 are as follows (in thousands):
2001 2000
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Foreign currency translation adjustments $ (1,818) $ (1,622)
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Accumulated other comprehensive income $ (1,818) $ (1,622)
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D) Earnings per Share
The calculation of dilutive weighted average shares outstanding for the three
and six months ended June 30, 2001 and 2000 are as follows (in thousands):
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THREE MONTHS ENDED
JUNE 30,
2001 2000
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Basic weighted average shares outstanding 9,711 9,895
Dilutive impact of options outstanding 29 13
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Dilutive weighted average shares outstanding 9,740 9,908
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SIX MONTHS ENDED
JUNE 30,
2001 2000
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Basic weighted average shares outstanding 9,710 9,991
Dilutive impact of options outstanding 26 9
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Dilutive weighted average shares outstanding 9,736 10,000
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E) Revolving Line of Credit
In March 2001 the Company entered into a $50 million revolving line of credit.
The revolving line of credit matures five years from the closing date and
carries an interest rate of prime minus 150 basis points floating or LIBOR plus
75 basis points, at the Company's option. Interest is payable quarterly on prime
borrowings and at the earlier of quarterly or maturity with respect to the LIBOR
contracts. The line of credit contains certain financial covenants regarding
interest coverage, minimum stockholders' equity and working capital, all of
which the Company was in compliance with at June 30, 2001.
F) On March 30, 2001, the Company purchased certain assets of Premier Farnell's
Cleveland based North American Industrial Products (IPD) and Kent Automotive
(Kent) Divisions for approximately $28.4 million plus approximately $8.0 million
for related inventories. This all-cash transaction was accounted for as a
purchase; accordingly, the accounts and transactions of the acquired business
have been included in the consolidated financial statements since the date of
acquisition. Under the agreement, the Company acquired the field sales,
telephone sales and customer service professionals, the customer accounts,
certain administrative executives, and use of various intellectual properties,
including trademarks and trade names of the IPD and Kent divisions in certain
territories. The assets acquired were recorded at estimated fair values as
determined by the Company's management based on information currently available.
Accordingly, the allocation of the purchase price is subject to revision. The
Company will combine its existing operations with Premier Farnell's Premier
Fastener, Rotanium Products, Certanium Alloys, CT Engineering, JI Holcomb and
Kent Automotive business units in the United States, Canada, Mexico, Central
America and the Caribbean. Due to the nature of the acquisition, the Company is
unable to provide any meaningful pro forma information of prior period results.
G) Reclassification
In the fourth quarter of 2000, the Company adopted Emerging Issues Task Force
(EITF) No. 00-10, "Accounting for Shipping and Handling Fees and Costs." EITF
00-10 requires companies to reflect all amounts billed to customers in sales
transactions as part of net sales. As such, the Company has reclassified
$2,720,000 and $5,291,000 of freight revenue to net sales from selling, general
and administrative expenses for the second quarter and six months ended June 30,
2000, respectively.
H) New Accounting Standards
In June 2001, the Financial Accounting Standards Board issued Statement No. 142,
"Goodwill and Intangible Assets." Statement No. 142 provides that amortization
of goodwill no longer be required but does require the testing of the goodwill
for impairment at least annually. Statement No. 142 will be required to be
adopted by the Company as of January 1, 2002. The Company expects the impact of
adoption will be to increase operating income by approximately $1.6 million in
2002.
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I) Segment Reporting
The company has three reportable segments: Maintenance, Repair and Replacement
(MRO) distribution, OEM distribution and manufacturing (OEM), and international
distribution.
Financial information for the Company's reportable segments consisted of the
following:
Three Months Ended June 30
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In thousands 2001 2000
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Net sales
MRO distribution $ 80,612 $ 72,551
OEM distribution 12,570 13,695
International distribution 5,798 3,386
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Consolidated total $ 98,980 $ 89,632
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Operating income (loss)
MRO distribution $ 6,011 $ 9,924
OEM distribution 653 1,146
International distribution 214 (230)
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Consolidated total $ 6,878 $ 10,840
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The reconciliation of segment profit to consolidated income before income taxes
consisted of the following:
Three Months Ended June 30
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In thousands 2001 2000
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Total operating income from
reportable segments $ 6,878 $ 10,840
Investment and other income 303 541
Interest expense (254) -
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Income before income taxes $ 6,927 $ 11,381
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Six Months Ended June 30
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In thousands 2001 2000
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Net sales
MRO distribution $ 147,783 $ 141,718
OEM distribution 25,866 27,555
International distribution 8,981 6,639
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Consolidated total $ 182,630 $ 175,912
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Operating income (loss)
MRO distribution $ 10,953 $ 19,468
OEM distribution 1,256 2,149
International distribution (249) (432)
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Consolidated total $ 11,960 $ 21,185
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The reconciliation of segment profit to consolidated income before income taxes
consisted of the following:
Six Months Ended June 30
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In thousands 2001 2000
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Total operating income from
reportable segments $ 11,960 $ 21,185
Investment and other income 1,046 1,107
Interest expense (254) (3)
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Income before income taxes $ 12,752 $ 22,289
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Asset information related to the Company's reportable segments consisted of the
following:
In thousands June 30, 2001 December 31, 2000
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Total assets
MRO distribution $ 179,690 $ 160,169
OEM distribution 33,157 32,182
International distribution 20,853 19,302
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Total for reportable segments 233,700 211,652
Corporate 11,612 11,069
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Consolidated total $ 245,312 $ 222,721
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-8-
Independent Accountants' Review Report
Board of Directors and Stockholders
Lawson Products, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of Lawson
Products, Inc. and subsidiaries as of June 30, 2001 and the related condensed
consolidated statements of income for the three month and six month periods
ended June 30, 2001 and 2000 and the condensed consolidated statements of cash
flows for the six month periods ended June 30, 2001 and 2000. 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
auditing standards generally accepted in the United States, 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 accounting principles generally
accepted in the United States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of Lawson
Products, Inc. as of December 31, 2000, and the related consolidated statements
of income, changes in stockholders' equity and cash flows for the year then
ended, not presented herein, and in our report dated February 23, 2001, 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, 2000, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/ ERNST & YOUNG LLP
July 17, 2001
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This Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, contains
certain forward-looking statements pertaining to the ability of the Company to
finance future growth, cash dividends and capital expenditures, the ability to
successfully integrate acquired businesses and certain other matters. These
statements are subject to uncertainties and other factors which could cause
actual events or results to vary materially from those anticipated. The Company
does not undertake any obligation to revise these forward-looking statements to
reflect future events or circumstances.
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
Net sales for the three and six month periods ended June 30, 2001 increased
10.4% to $98,980,000 and 3.8% to $182,630,000, respectively, relative to the
comparable periods of 2000. The sales gains are attributable to the sales
generated by the North American Industrial Products (IPD) and Kent Automotive
(Kent) Divisions of Premier Farnell which were acquired on March 30, 2001 of
approximately $13,020,000. The sales generated by IPD and Kent more than offset
decreased sales from substantially all Lawson operations. See Note F to Notes to
Condensed Consolidated Financial Statements.
Gross profit, as a percentage of sales, was flat compared to the second quarter
of 2000. Selling, general and administrative expenses increased approximately
$10 million to $58.2 million for the second quarter of 2001. The biggest cause
of this increase was increased sales agent compensation on the 10.4 percent
increase in net sales as well as additional costs incurred for the IPD/Kent
acquisition on March 30, 2001, including employee salaries paid to the telephone
sales, customer service professionals and certain administrative executives and
the amortization of goodwill.
The Company's acquisition of IPD and Kent was completed using the proceeds from
the sale of marketable securities and borrowings under the $50 million unsecured
line of credit which the Company entered into in March 2001. This resulted in
the decrease in investment and other income and an increase in interest expense
for both of the 2001 periods presented in comparison to 2000.
The decrease in the provision for income taxes for both 2001 periods presented
is due to the decrease in income before income taxes partially offset by a
higher effective tax rate. The higher effective tax rate was primarily due to
foreign losses for which no income tax benefits are currently available.
Net income for the second quarter declined 40.6% to $3,988,000 ($.41 per diluted
share) from $6,717,000 ($.68 per diluted share) for the similar period of 2000.
Net income for the six months ended June 30, 2001 decreased 45.1% to $7,226,000
($.74 per diluted share) from $13,162,000 ($1.32 per diluted share) for the same
period of 2000. The decrease in net income resulted primarily from the higher
selling, general and administrative expenses discussed above and reduced
contribution from substantially all Lawson operations, offset by the gains in
net sales from IPD/Kent noted above. Per share net income for 2001 and 2000 was
positively impacted by the Company's share repurchase program.
The Company used $12,719,000 of cash in operations for the six months ended June
30, 2001 compared to cash provided from operations of $8,124,000 in the similar
period of the prior year. This decline was due primarily to the decrease in net
income noted above, increases in accounts receivable, inventories and other
current assets largely associated with the acquisition of IPD and Kent.
Additions to property, plant and equipment were $3,755,000 and $1,764,000,
respectively, for the six months ended June 30, 2001 and 2000. Capital
expenditures during 2001 primarily reflect purchases of computer related and
warehouse equipment and building improvements, while 2000 additions to property,
plant and equipment primarily reflect purchases of computer related equipment.
On March 30, 2001, the Company purchased certain assets of Premier Farnell's
Cleveland based North American Industrial Products (IPD) and Kent Automotive
(Kent) Divisions for approximately $28.4 million plus approximately $8.0 million
for related inventories. This all-cash transaction was accounted for as a
purchase; accordingly, the accounts and transactions of the acquired business
have been included in the consolidated financial statements since the date of
acquisition. Under the agreement, the Company acquired the field sales,
telephone sales and customer service professionals, the customer accounts,
certain administrative executives, and use of various intellectual properties,
including trademarks and trade names of the IPD and Kent divisions in certain
territories. The assets acquired were recorded at estimated fair values as
determined by the Company's management based on information currently available.
Accordingly, the allocation of the purchase price is subject to revision.
During the first six months of 2001, the Company purchased 1,647 shares of its
common stock for approximately $46,000. These shares were acquired pursuant to
the 1999 Board authorization to purchase up to 500,000 shares. In the first six
months of 2000, the Company purchased 453,700 shares of its common stock for
approximately $10,752,000. Of these purchases, 365,100 shares were acquired
pursuant to the 1999 Board authorization described
-11-
above and 88,600 shares represented the remaining shares authorized for purchase
under the 1998 Board authorization to purchase up to 500,000 shares. All shares
purchased as of June 30, 2001 have been retired. Funds to purchase these shares
were provided by investments and cash flows from operations.
Current investments, cash flows from operations and the new $50,000,000
unsecured line of credit are expected to be sufficient to finance the Company's
future growth, cash dividends and capital expenditures.
-12-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in market risk at June 30, 2001 from that
reported in the Company's Annual Report on Form 10-K for the year ended December
31, 2000.
-13-
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 15, 2001.
(b) Not applicable.
(c) Set forth below is the tabulation of the votes on each nominee for
election as a director:
For Withheld
Authority
Bernard Kalish 9,217,688 220,148
Sidney L. Port 9,134,507 303,329
Robert J. Washlow 9,225,400 212,436
(d) Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) 10 Amended Stock Performance Plan
15 Letter from Ernst & Young LLP Regarding Unaudited
Interim Financial Information
(b) The registrant filed an Item 5 and Item 7 Current Report on
Form 8-K on April 10, 2001.
-14-
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 17, 2001 /s/ Robert J. Washlow
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Robert J. Washlow
Chairman of the Board
Dated July 17, 2001 /s/ Joseph L. Pawlick
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Joseph L. Pawlick
Chief Financial Officer
(Principal Financial Officer)
-15-
Exhibit 10
LAWSON PRODUCTS, INC.
AMENDED STOCK PERFORMANCE PLAN
------------------------------
1. PURPOSE. The purpose of the Lawson Products, Inc. Amended Stock
Performance Plan (the "Plan") is to attract and retain outstanding individuals
as officers, key employees and directors of, and consultants to, Lawson
Products, Inc. (the "Company") and to furnish performance-based incentives to
such persons by providing opportunities to participate in the growth in value of
the Company on advantageous terms as herein provided. No shares of Lawson Common
Stock will be issued under the Plan but participants will be able to receive the
gain in value of Lawson Common Stock, in cash.
2. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Board of Directors of the Company (the "Committee"). The
Committee shall interpret the Plan, prescribe, amend and rescind rules and
regulations relating thereto and make all other determinations necessary or
advisable for the administration of the Plan. Any interpretation or construction
by the Committee of any provision of the Plan or any award granted under it
shall be final. No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any award granted
under it.
3. PARTICIPANTS. Participants in the Plan will consist of such key
management employees and Qualifying Directors (as hereinafter defined) of, and
consultants to, the Company as the Committee in its sole discretion may
designate from time to time to receive awards hereunder. The Committee's
designation of a participant in any year shall not require the Committee to
designate such person to receive an award in any other year. Nothing in the Plan
or any award under it shall limit in any way the right of the Company to
terminate the Company's employment or consulting relationship (if any) with a
participant at any time nor confer upon any employee or consultant any right to
continue in the employ of, or as a consultant to, the Company for any period of
time.
4. AWARDS. All awards under the Plan shall be granted in the form of
stock performance rights, in accordance with the following terms:
(a) The Committee shall determine the number of shares of Common
Stock subject to each stock performance right, the term of each right, and
subject to the following, any other terms and conditions applicable
thereto.
(b) Each stock performance right will entitle the holder to elect
to receive the appreciation in the fair market value of the shares subject
thereto up to the date the right is exercised. Such appreciation shall be
measured from the initial value established by the Committee which shall be
not less than the fair market value of the Common Stock of the Company on
the date the right is granted.
(c) The fair market value of the Company's Common Stock shall be
the closing price of a share of Lawson Common Stock on the relevant date,
as reported on NASDAQ or any exchange on which the Common Stock is then
listed.
(d) Each stock performance right will be exercisable at the time
and to the extent established by the Committee at the time of grant.
Payment of the appreciation shall be made in cash as soon as practicable
following exercise.
(e) The terms of each award shall indicate what rights, if any,
the participant or his estate shall have in such award in the event of the
death, total permanent disability, retirement or other termination of the
participant's relationship with the Company.
(f) In the event of a change of control, as hereinafter defined,
all of the rights then outstanding under the Plan shall be deemed fully
vested and exercised on the date of the transaction and the appreciation
shall be paid as soon as possible to the holders thereof.
(g) A "change of control" shall be deemed to have occurred on the
first date on which either: (i) any "person" is or becomes the beneficial
owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934
(the "Exchange Act")), directly or indirectly of securities of the Company
representing at least thirty (30) percent of the combined voting power of
the Company's then outstanding securities, or (ii) a majority of the
individuals comprising the Company's Board of Directors are not Continuing
Directors, or (iii) the Company is involved in any merger, consolidation,
share exchange or any other transaction if, after the consummation thereof,
the holders of the voting securities of the Company immediately prior
thereto do not own at least a majority of the combined voting power of the
surviving or resulting corporation, or (iv) all or substantially all of the
assets of the Company are sold or otherwise transferred, or (v) a change
occurs of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A, promulgated under the Exchange
Act, or any other successor disclosure item.
(h) A "person" means a person, (as such term is used in Sections
13(d) and 14(d) of the
Exchange Act) but excluding Sidney L. Port, the estate of Bettie Port,
their descendants, their spouses, and trusts, partnerships or other
entities for the benefit of any such persons, or in which any such persons
have a controlling interest.
(i) A "Continuing Director" means an individual who was a member
of the Board of Directors of the Company immediately prior to the
transaction or election or other event which resulted in a Change of
Control or who was designated (before his initial election or appointment
as a director) as a Continuing Director by a majority of the whole Board of
Directors but only if the majority of the whole Board of Directors then
consisted of Continuing Directors or, if a majority of the whole Board of
Directors shall not then consist of Continuing Directors, by a majority of
the then Continuing Directors.
(j) A "Qualifying Director" means an individual who is a member of
the Board of Directors of the Company but is not an employee or former
employee of the Company or any subsidiary of the Company.
5. NONTRANSFERABILITY. All stock performance rights granted under the
Plan shall not be transferable other than by will or the laws of descent and
distribution and shall be exercisable during the participant's lifetime only by
the participant or the participant's guardian or legal representative.
6. OTHER PROVISIONS. The grant of any stock performance right under the
Plan may also be subject to other provisions (whether or not applicable to the
rights awarded to any other participant) including conditions precedent to the
right to exercise, as the Committee determines appropriate, including such
provisions as may be required to comply with federal or state securities laws
and stock exchange requirements and understandings or conditions as to the
employment of any participant who is an employee.
7. ADJUSTMENT PROVISIONS.
(a) If the Company shall at any time change the number of shares
of Common Stock outstanding without new consideration to the Company, a
corresponding increase shall be made in the number of shares covered by
each outstanding right and a decrease shall be made in the initial
value of each right so that the aggregate net benefit to the
participant shall not be changed. If the Company shall at any time
decrease the number of shares of Common Stock outstanding without any
distribution to its stockholders, a corresponding decrease shall be
made in the number of shares covered by each outstanding right and an
increase shall be made in the initial value of each right so that the
aggregate net benefit to the participant shall
not be changed.
(b) In the event of a reorganization, recapitalization or other
change in the shares of Common Stock outstanding, the Committee shall
make whatever changes in the Plan and in any rights then outstanding it
deems necessary or appropriate.
8. TAXES. The Company shall be entitled to withhold the amount of any
tax attributable to the exercise of any right under the Plan, if withholding is
appropriate, and may defer making payment or delivery as to any exercise if any
such tax is payable until indemnified to its satisfaction.
9. TERM OF PROGRAM; AMENDMENT OR CANCELLATION OF BENEFITS. The Plan
shall continue in effect until terminated by the Committee pursuant to Section
10. The terms and conditions applicable to any rights granted hereunder may at
any time be amended or cancelled by mutual agreement between the Committee and
the participant or any other person as may then have an interest therein and may
be unilaterally modified by the Committee whenever such modification is deemed
necessary to protect the Company.
10. AMENDMENT OR DISCONTINUATION OF PLAN. The Committee may amend,
suspend or discontinue the Plan at any time; provided, however, that no such
action shall adversely affect any outstanding stock performance right.
Exhibit 15
July 17, 2001
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 17, 2001 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, 2001.
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.
/s/ ERNST & YOUNG LLP