UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
---------------------------
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2003.
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
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-----------------------------
Commission file no. 0-10546
LAWSON PRODUCTS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 36-2229304
- --------------------------------- ------------------------------------
(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 by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). 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.
9,490,111 SHARES, $1 PAR VALUE, AS OF JULY 15, 2003.
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) JUNE 30, DECEMBER 31,
2003 2002
---------------- ---------------
(UNAUDITED)
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 6,791 $ 7,591
Marketable securities 590 696
Accounts receivable, less allowance for doubtful accounts 45,760 42,990
Inventories 64,272 63,851
Miscellaneous receivables and prepaid expenses 9,623 11,170
Deferred income taxes 3,293 3,463
-------------- --------------
Total Current Assets 130,329 129,761
Property, plant and equipment, less allowances for depreciation and
amortization 39,448 39,519
Investments in real estate 1,565 1,305
Deferred income taxes 12,178 11,987
Goodwill 28,649 28,649
Other assets 14,459 14,610
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Total Assets $ 226,628 $ 225,831
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 7,078 $ 8,085
Accrued expenses and other liabilities 19,367 23,638
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Total Current Liabilities 26,445 31,723
-------------- --------------
Accrued liability under security bonus plans 20,576 20,614
Other 11,562 11,151
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32,138 31,765
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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-(2003 - 9,490,111 shares; 2002- 9,494,011 shares) 9,490 9,494
Capital in excess of par value 2,262 2,387
Retained earnings 157,235 152,495
Accumulated other comprehensive income (942) (2,033)
-------------- --------------
Total Stockholders' Equity 168,045 162,343
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Total Liabilities and Stockholders' Equity $ 226,628 $ 225,831
============== ==============
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,
--------------------------------- --------------------------------
2003 2002 2003 2002
--------------- --------------- --------------- --------------
Net sales $ 97,109 $ 99,890 $ 193,184 $ 195,636
Cost of goods sold (Note B) 35,034 35,343 69,582 69,047
-------------- -------------- -------------- --------------
Gross profit 62,075 64,547 123,602 126,589
Selling, general and administrative expenses 54,505 56,995 109,770 113,037
1,246 -- 1,246 --
-------------- -------------- -------------- --------------
Operating income 6,324 7,552 12,586 13,552
Investment and other income 388 535 747 1,018
Interest expense 7 31 7 104
-------------- -------------- -------------- --------------
Income before income taxes 6,705 8,056 13,326 14,466
Provision for income taxes 2,564 3,360 5,427 5,938
-------------- -------------- -------------- --------------
Net income $ 4,141 $ 4,696 $ 7,899 $ 8,528
============== ============== ============== ==============
Net income per share of common stock:
Basic $ 0.44 $ 0.49 $0.83 $ 0.89
============== ============== ============== ==============
Diluted $ 0.44 $ 0.49 $0.83 $ 0.88
============== ============== ============== ==============
Cash dividends declared per
share of common stock $ 0.16 $ 0.16 $0.32 $ 0.32
============== ============== ============== ==============
Weighted average shares outstanding:
Basic 9,490 9,611 9,491 9,619
============== ============== ============== ==============
Diluted 9,506 9,643 9,509 9,647
============== ============== ============== ==============
See notes to condensed consolidated financial statements.
-3-
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
FOR THE
SIX MONTHS ENDED
JUNE 30,
2003 2002
--------------- --------------
Operating activities:
Net income $ 7,899 $ 8,528
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 3,255 3,454
Changes in operating assets and liabilities (8,196) (1,139)
Other 1,831 1,768
-------------- --------------
Net Cash Provided by Operating Activities 4,789 12,611
-------------- --------------
Investing activities:
Additions to property, plant and equipment (2,508) (3,605)
Purchases of marketable securities (2,059) (4,679)
Proceeds from sale of marketable securities 2,166 5,632
Other 100 356
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Net Cash Used in Investing Activities (2,301) (2,296)
-------------- ---------------
Financing activities:
Purchases of treasury stock (127) (2,284)
Proceeds from revolving line of credit 4,000 26,000
Payments on revolving line of credit (4,000) (35,000)
Dividends paid (3,037) (3,079)
Other (124) 1,249
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Net Cash Used in Financing Activities (3,288) (13,114)
-------------- ---------------
Decrease in Cash and Cash Equivalents (800) (2,799)
Cash and Cash Equivalents at Beginning of Period 7,591 6,987
-------------- --------------
Cash and Cash Equivalents at End of Period $ 6,791 $ 4,188
============== ==============
See notes to condensed consolidated financial statements.
-4-
PART I - 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, 2002. The
Condensed Consolidated Balance Sheet as of June 30, 2003, the Condensed
Consolidated Statements of Income for the three and six month periods ended June
30, 2003 and 2002 and the Condensed Consolidated Statements of Cash Flows for
the six month periods ended June 30, 2003 and 2002 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, 2003 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2003.
B) Inventories (consisting of primarily finished goods) at June 30, 2003 and
cost of goods sold for the three and six month periods ended June 30, 2003 were
based on perpetual inventory records. Inventories (consisting of primarily
finished goods) at June 30, 2002 and cost of goods sold for the three and six
month periods ended June 30, 2002 were determined through the use of estimated
gross profit rates. The difference between actual and estimated gross profit in
2002 was adjusted in the fourth quarter. In 2002, this adjustment increased net
income by approximately $1,955,000.
C) Total comprehensive income and its components, net of related tax, for the
first three and six months of 2003 and 2002 are as follows (in thousands):
Three months ended June 30,
2003 2002
---- ----
Net income $4,141 $4,696
Foreign currency translation adjustments 750 342
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Comprehensive income $4,891 $5,038
====== ======
Six months ended June 30,
2003 2002
---- ----
Net income $7,899 $8,528
Foreign currency translation adjustments 1,091 225
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Comprehensive income $8,990 $8,753
====== ======
The components of accumulated other comprehensive income, net of related tax, at
June 30, 2003 and December 31, 2002 are as follows (in thousands):
2003 2002
---- ----
Foreign currency translation adjustments $ (942) $(2,033)
--------- --------
Accumulated other comprehensive income $ (942) $(2,033)
========= ========
D) Earnings per Share
The calculation of dilutive weighted average shares outstanding for the three
and six months ended June 30, 2003 and 2002 are as follows (in thousands):
Three months ended June 30,
2003 2002
---- ----
Basic weighted average shares outstanding 9,490 9,611
Dilutive impact of options outstanding 16 32
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Dilutive weighted average shares outstanding 9,506 9,643
===== =====
-5-
Six months ended June 30,
2003 2002
---- ----
Basic weighted average shares outstanding 9,491 9,619
Dilutive impact of options outstanding 18 28
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Dilutive weighted average shares outstanding 9,509 9,647
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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, 2003. The Company had no borrowings
outstanding under the line at June 30, 2003, and December 31, 2002.
F) Special Charges
The Company recorded a $1.2 million charge for termination benefits of four
executives in the second quarter of 2003.
The table below shows an analysis of the Company's reserves for severance and
related expenses for the first six months of 2003 and 2002:
Six months ended June 30,
2003 2002
---- ----
Balance at beginning of year $ 876 $1,458
Charged to earnings 1,246 --
Cash paid (283) (482)
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Balance at June 30 $1,839 $ 976
====== ======
G) Intangible Assets
Intangible assets subject to amortization, included within other assets, were as
follows (in thousands):
June 30, 2003
-------------
Net
Gross Accumulated Carrying
Balance Amortization Amount
------- ------------ ------
Trademarks and tradenames $1,747 $760 $ 987
Customer Lists 953 124 829
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$2,700 $884 $1,816
====== ==== ======
-6-
December 31, 2002
-----------------
Net
Gross Accumulated Carrying
Balance Amortization Amount
------- ------------ --------
Trademarks and tradenames $1,747 $668 $1,079
Customer Lists 953 33 920
------- ------- -------
$2,700 $701 $1,999
====== ==== ======
Trademarks and tradenames are being amortized over a weighted average 15.1
years. Customer lists are being amortized over 15.2 years. Amortization expense
for intangible assets is expected to be $322,000, $176,000, $143,000, $143,000
and $98,000 for 2003 and the next four years, respectively.
H) Accounting for Stock-Based Compensation
The Company adopted FASB Statement No. 148, "Accounting for Stock Based
Compensation - Transition and Disclosure." This Statement requires additional
disclosure within interim financial statements. The following tables show the
effect on net income and earnings per share as required by FASB Statement No.
123, "Accounting for Stock-Based Compensation."
Three Months Ended June 30,
------------------------------
In thousands 2003 2002
- --------------------------------------------------------------------------------
Net income-as reported $4,141 $4,696
Deduct: Total stock based employee compensation
expense determined under fair value method,
net of tax (9) (13)
------------------------------
Net income-pro forma 4,132 4,683
Basic and diluted earnings per share-as reported .44 .49
Basic earnings per share-pro forma .44 .49
Diluted earnings per share pro forma .43 .49
Six Months Ended June 30,
------------------------------
In thousands 2003 2002
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Net income-as reported $7,899 $8,528
Deduct: Total stock based employee compensation
expense determined under fair value method,
net of tax (16) (22)
------------------------------
Net income-pro forma 7,883 8,506
Basic earnings per share-as reported .83 .89
Diluted earnings per share-as reported .83 .88
Basic and diluted earnings per share-pro forma .83 .88
A $223,000 reversal of a compensation expense accrual relative to stock
performance rights was recorded in the first six months of 2003. The first six
months of 2002 includes $68,000 in compensation expense relative to stock
performance rights.
I) Segment Reporting
The Company has four reportable segments: Maintenance, Repair and Replacement
(MRO) distribution; Original Equipment Manufacturer (OEM) distribution and
manufacturing; International Maintenance, Repair and Replacement (INTLMRO)
distribution in Canada; and International Original Equipment Manufacturer
(INTLOEM) distribution in Mexico and the United Kingdom.
-7-
Financial information for the Company's reportable segments consisted of the
following:
Three Months Ended June 30,
--------------------------------
In thousands 2003 2002
- --------------------------------------------------------------------------------
Net sales
MRO distribution $ 75,326 $ 78,878
OEM distribution & manufacturing 13,325 14,576
International MRO distribution 4,901 4,426
International OEM distribution 3,557 2,010
--------------------------------
Consolidated total $ 97,109 $ 99,890
--------------------------------
Operating income (loss)
MRO distribution $ 6,108 $ 6,822
OEM distribution & manufacturing (332) 1,055
International MRO distribution 690 480
International OEM distribution (142) (805)
--------------------------------
Consolidated total $ 6,324 $ 7,552
--------------------------------
The reconciliation of segment profit to consolidated income before income taxes
consisted of the following:
Three Months Ended March 31,
--------------------------------
In thousands 2003 2002
- --------------------------------------------------------------------------------
Total operating income from
Reportable segments $ 6,324 $ 7,552
Investment and other income 388 535
Interest expense (7) (31)
--------------------------------
Income before income taxes $ 6,705 $ 8,056
--------------------------------
Six Months Ended June 30,
--------------------------------
In thousands 2003 2002
- --------------------------------------------------------------------------------
Net sales
MRO distribution $ 150,373 $ 154,659
OEM distribution & manufacturing 27,596 29,060
International MRO distribution 9,287 8,301
International OEM distribution 5,928 3,616
--------------------------------
Consolidated total $ 193,184 $ 195,636
--------------------------------
Operating income (loss)
MRO distribution $ 12,212 $ 12,314
OEM distribution & manufacturing 143 2,122
International MRO distribution 1,014 430
International OEM distribution (783) (1,314)
--------------------------------
Consolidated total $ 12,586 $ 13,552
--------------------------------
-8-
The reconciliation of segment profit to consolidated income before income taxes
consisted of the following:
Six Months Ended June 30,
--------------------------------
In thousands 2003 2002
- --------------------------------------------------------------------------------
Total operating income from
Reportable segments $ 12,586 $ 13,552
Investment and other income 747 1,018
Interest expense (7) (104)
--------------------------------
Income before income taxes $ 13,326 $ 14,466
--------------------------------
Asset information related to the Company's reportable segments consisted of the
following:
December 31,
In thousands June 30, 2003 2002
- --------------------------------------------------------------------------------
Total assets
MRO distribution $ 150,689 $ 155,439
OEM distribution & manufacturing 34,631 32,574
International MRO distribution 15,745 13,989
International OEM distribution 10,092 8,379
--------------------------------
Total for reportable segments 211,157 210,381
Corporate 15,471 15,450
--------------------------------
Consolidated total $ 226,628 $ 225,831
--------------------------------
At December 31, 2002, the carrying value of goodwill within each reportable
segment was as follows (in thousands):
MRO distribution $22,104
OEM distribution & manufacturing 2,251
International MRO distribution 4,294
International OEM distribution --
--------
$28,649
--------
J) Impact of Recently Issued Accounting Standards
The Financial Accounting Standards Board (FASB) recently issued Interpretation
No. 46, "Consolidation of Variable Interest Entities." The Interpretation
explains how to identify variable interest entities (VIE) and how an enterprise
assesses its interest in a VIE to decide whether to consolidate the VIE. It
requires existing unconsolidated VIEs to be consolidated if the Company is the
primary beneficiary. A primary beneficiary of a VIE is a party that absorbs a
majority of the entity's expected losses, receives a majority of its expected
residual returns, or both. This Interpretation applies immediately to VIEs
created after January 1, 2003 and for the Company's interim period beginning
July 1, 2003 for VIEs, which the Company acquired prior to February 1, 2003. The
Company is evaluating the Interpretation, which may require the Company's
consolidation of its investment in a real estate property, which is a building
in Chicago, Illinois. The Company does not believe they are exposed to any
potential loss on its investment.
-9-
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, 2003 and the related condensed
consolidated statements of income for the three-month and six-month periods
ended June 30, 2003 and 2002 and the condensed consolidated statements of cash
flows for the six-month periods ended June 30, 2003 and 2002. 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 review, 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, 2002, 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 20, 2003, 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, 2002, 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 15, 2003
-10-
This Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, 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.
-11-
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
REVENUES
- --------
Net sales for the three and six-month periods ended June 30, 2003 decreased
2.8%, from $99.9 million to $97.1 million and 1.3%, from $195.6 million to
$193.2 million, respectively, compared to the similar periods of 2002. Combined
Maintenance, Repair and Replacement (MRO and INTLMRO) distribution net sales
decreased $3.1 million in the second quarter to $80.2 million from $83.3 million
and $3.3 million for the six-month period to $159.7 million from $163.0 million.
The decreases are primarily attributable to continuing difficult market
conditions.
Combined Original Equipment Manufacturer (OEM and INTLOEM) net sales increased
$0.3 million in the second quarter to $16.9 million from $16.6 million and $0.8
million in the first six months to $33.5 million from $32.7 million. Sales
growth in the INTLOEM segment for the three and six-month periods, resulting
principally from increased penetration of existing accounts and the addition of
new accounts, more than offset sales declines in the domestic OEM segment.
OPERATING INCOME
- ----------------
Including a special charge of $1.2 million in the aggregate in the second
quarter of 2003, described below, consolidated operating income declined 16.3%,
to $6.3 million from $7.6 million in the same period last year. For the
six-month period ended June 30, 2003, consolidated operating income decreased
7.1%, to $12.6 million from $13.6 million in the first six months of 2002.
In the second quarter, the combined MRO segments incurred a special charge of
$0.7 million for the severance and retirement of certain management personnel
which more than offset the Company's continuing efforts to contain and reduce
MRO costs. Including the special charge, the combined MRO segments experienced
an operating income decrease of $0.5 million in the second quarter.
In the six-month period, operating income for the combined MRO segments
increased by $0.5 million. This increase was primarily attributable to the
Company's continuing efforts to contain and reduce MRO costs, which more than
offset the special charge noted above.
Including a special charge of $0.5 million, described below, the combined OEM
segments had an operating loss of $0.5 million for the quarter ended June 30,
2003 compared to operating income of $0.2 million for the similar period of
2002. In the six-month period ended June 30, 2003, the combined OEM segments had
an operating loss of $0.6 million compared to operating income of $0.8 million
for the same period of 2002. These declines are primarily attributable to the
special charge for the severance and retirement of certain management personnel
and lower gross margins, principally in the domestic OEM segment, which more
than offset the sales gains noted above.
NET INCOME
- ----------
In the second quarter of 2003, net income decreased 11.8%, to $4.1 million ($.44
per diluted share), compared to $4.7 million ($.49 per diluted share) in the
second quarter of 2002. Net income for the six-month period ended June 30, 2003
declined 7.4%, to $7.9 million ($.83 per diluted share), from $8.5 million ($.88
per diluted share) in the similar period of 2002. The decline in net income for
both periods resulted principally from the special charges of $1.2 million ($0.8
million after tax) for severance and retirement programs noted above, offset by
a decrease in the effective tax rate. The decline in the effective tax rate was
due principally to lower losses internationally. The Company has not
historically provided a tax benefit for those losses. Per share net income for
2003 and 2002 was positively impacted by the Company's share repurchase program.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash flows provided by operations for the six months ended June 30, 2003 and
June 30, 2002 were $4.8 million and $12.6 million, respectively. In 2003,
increases in net operating assets, primarily accounts receivable and
inventories, negatively impacted cash flows from operations. In 2002, cash flows
provided by operating activities were positively impacted by higher net income
and decreases in inventories and other assets. Additions to property, plant and
equipment were $2.5 million and $3.6 million, respectively, for the six months
ended June 30, 2003 and 2002. Capital expenditures for 2003 and 2002 were
incurred primarily for improvement of existing facilities and for the purchase
of related equipment. In 2002, capital expenditures also included improvements
of new leased facilities.
-12-
During the first six months of 2003, the Company purchased 4,600 shares of its
own common stock for approximately $127,000 pursuant to the 2000 Board
authorization to purchase up to 500,000 shares. In the first six months of 2002,
the Company purchased 76,150 shares of its own common stock for approximately
$2,284,000. Of these purchases, a total of 73,315 shares were acquired pursuant
to the 2000 Board authorization to purchase up to 500,000 shares and 2,835
shares represented the remaining shares authorized for purchase under the 1999
Board authorization to purchase up to 500,000 shares. All shares purchased as of
June 30, 2003 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 $50,000,000 unsecured
line of credit are expected to be sufficient to finance the Company's future
growth, cash dividends and capital expenditures.
-13-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in market risk at June 30, 2003 from that
reported in the Company's Annual Report on Form 10-K for the year ended December
31, 2002.
ITEM 4. CONTROLS AND PROCEDURES
Our Chief Executive Officer and Executive Vice President, Finance (the chief
financial officer) have concluded, based on their evaluation as of the end of
the period covered by the report, that the Company's "disclosure controls and
procedures" (as defined in the Securities and Exchange Act of 1934 Rules
13a-15(e) and 15d-15(e)) are effective to ensure that information required to be
disclosed in the reports that the Company files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms.
-14-
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 13, 2003.
(b) Set forth below is the tabulation of the votes on each nominee for
election as a director:
For Withheld
Authority
James T. Brophy 8,712,337 60,644
Mitchell H. Saranow 8,714,229 58,752
Jerome Shaffer 8,523,183 249,798
Messers. Kalish, Port and Washlow continue to serve as directors of the
Company for terms ending in 2004 and Messers. Port, Rettig and Melzer continue
to serve as directors of the Company for terms ending in 2005.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
--------
15 Letter from Ernst & Young LLP Regarding Unaudited
Interim Financial Information
31 Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 302 of the
Sarbanes-OxleyAct of 2002
32 Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the
Sarbanes-OxleyAct of 2002
(b) Reports on Form 8-K
-------------------
Current Report on Form 8-K, filed with the Securities and
Exchange Commission on April 17, 2003, regarding the Company's results
from operations for the quarter ended March 31, 2003.
-15-
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 24, 2003 /s/ Robert J. Washlow
------------- -------------------------------
Robert J. Washlow
Chief Executive Officer
(principal executive officer)
Dated July 24, 2003 /s/ Richard A. Agostinelli
---------------- ----------------------------------
Richard A. Agostinelli
Executive Vice President, Finance
(principal financial officer)
-16-
Exhibit 15
Chicago, Illinois
July 15, 2003
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 15, 2003 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, 2003.
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
Exhibit 31
CERTIFICATIONS
--------------
I, Robert J. Washlow, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Lawson Products, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: July 24, 2003
/s/ Robert J. Washlow
- ---------------------
Robert J. Washlow
Chief Executive Officer
CERTIFICATIONS
--------------
I, Richard A. Agostinelli, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Lawson Products, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: July 24, 2003
/s/ Richard A. Agostinelli
- -------------------------------------------------------------
Richard A. Agostinelli, Executive Vice President, Finance
(principal financial officer)
Exhibit 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Lawson Products, Inc. (the
"Company") on Form 10-Q for the period ending June 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned Chief Executive Officer and Executive Vice President, Finance
(principal financial officer) of the Company hereby certify, pursuant to 18
U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002
that based on their knowledge: 1) the Report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
and 2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company as of
and for the periods covered in the Report.
/s/ Robert J. Washlow
- --------------------------------------------------------------
Robert J. Washlow, Chief Executive Officer
(principal executive officer)
/s/ Richard A. Agostinelli
- --------------------------------------------------------------
Richard A. Agostinelli, Executive Vice President, Finance
(principal financial officer)
July 24, 2003
