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 quarterly period ended September 30, 2002 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 9,503,611 Shares, $1 par value,
as of October 14, 2002.
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
September 30, December 31,
2002 2001
--------- ---------
(unaudited)
ASSETS
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Current Assets:
Cash and cash equivalents $ 3,491 $ 6,987
Marketable securities 1,162 1,737
Accounts receivable, less allowance for doubtful accounts 47,183 44,314
Inventories (Note B) 60,849 65,543
Miscellaneous receivables and prepaid expenses 12,013 12,009
Deferred income taxes 2,493 2,471
--------- ---------
Total Current Assets 127,191 133,061
Property, plant and equipment, less allowances for depreciation and amortization 40,129 39,059
Investments in real estate 1,255 945
Deferred income taxes 11,204 10,679
Goodwill, less accumulated amortization 28,649 28,810
Other assets 15,537 20,226
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Total Assets $ 223,965 $ 232,780
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities:
Revolving line of credit $ 3,000 $ 4,000
Accounts payable 6,748 6,948
Accrued expenses and other liabilities 17,235 21,414
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Total Current Liabilities 26,983 32,362
--------- ---------
Accrued liability under security bonus plans 20,250 19,297
Revolving line of credit -- 10,000
Other 12,712 11,223
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32,962 40,520
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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-(2002-9,510,611 shares; 2001-9,629,307 shares) 9,511 9,629
Capital in excess of par value 2,173 913
Retained earnings 154,411 151,554
Accumulated other comprehensive income (2,075) (2,198)
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Total Stockholders' Equity 164,020 159,898
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Total Liabilities and Stockholders' Equity $ 223,965 $ 232,780
========= =========
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 Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
-------- -------- -------- --------
Net sales $ 98,474 $100,000 $294,110 $282,630
Cost of goods sold (Note B) 35,211 35,256 104,258 99,081
-------- -------- -------- --------
Gross Profit 63,263 64,744 189,852 183,549
Selling, general and administrative expenses 56,883 58,939 169,920 165,784
-------- -------- -------- --------
Operating income 6,380 5,805 19,932 17,765
Investment and other income 293 297 1,311 1,343
Interest expense 45 264 149 518
-------- -------- -------- --------
Income before income taxes 6,628 5,838 21,094 18,590
Provision for income taxes 2,869 2,525 8,807 8,051
-------- -------- -------- --------
Net income $ 3,759 $ 3,313 $ 12,287 $ 10,539
======== ======== ======== ========
Net income per share of common stock:
Basic $ 0.39 $ 0.34 $ 1.28 $ 1.09
======== ======== ======== ========
Diluted $ 0.39 $ 0.34 $ 1.28 $ 1.08
======== ======== ======== ========
Cash dividends declared per share of common stock $ 0.16 $ 0.16 $ 0.48 $ 0.48
======== ======== ======== ========
Weighted average shares outstanding:
Basic 9,551 9,686 9,593 9,700
======== ======== ======== ========
Diluted 9,576 9,715 9,619 9,726
======== ======== ======== ========
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
Nine Months Ended
September 30,
2002 2001
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Operating activities:
Net income $ 12,287 $ 10,539
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 5,054 5,935
Changes in operating assets and liabilities (88) (20,418)
Other 2,427 1,417
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Net Cash Provided by (Used in) Operating Activities 19,680 (2,527)
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Investing activities:
Additions to property, plant and equipment (5,099) (4,141)
Purchases of marketable securities (6,264) (12,126)
Proceeds from sale of marketable securities 7,139 36,265
Acquisition of IPD and Kent Automotive --- (35,591)
Other 356 100
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Net Cash Used in Investing Activities (3,868) (15,493)
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Financing activities:
Purchases of treasury stock (5,041) (1,935)
Proceeds from revolving line of credit 34,000 57,800
Payments on revolving line of credit (45,000) (36,400)
Dividends paid (4,616) (4,563)
Other 1,349 166
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Net Cash Provided by (Used in) Financing Activities (19,308) 15,068
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Decrease in Cash and Cash Equivalents (3,496) (2,952)
Cash and Cash Equivalents at Beginning of Period 6,987 7,912
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Cash and Cash Equivalents at End of Period $ 3,491 $ 4,960
============ ============
See notes to condensed consolidated financial statements.
-4-
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, 2001. The
Condensed Consolidated Balance Sheet as of September 30, 2002, the Condensed
Consolidated Statements of Income for the three and nine month periods ended
September 30, 2002 and 2001 and the Condensed Consolidated Statements of Cash
Flows for the nine month periods ended September 30, 2002 and 2001 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 nine month periods ended September 30, 2002 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2002.
B) Inventories (consisting of primarily finished goods) at September 30, 2002
and cost of goods sold for the three and nine month periods ended September 30,
2002 and 2001 were primarily determined through the use of estimated gross
profit rates. The difference between actual and estimated gross profit is
adjusted in the fourth quarter. In 2001, this adjustment increased net income by
approximately $2,055,000.
C) Total comprehensive income and its components, net of related tax, for the
first three and nine months of 2002 and 2001 are as follows (in thousands):
Three months ended September 30,
2002 2001
---- ----
Net income $ 3,759 $ 3,313
Foreign currency translation adjustments (102) (310)
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Comprehensive income $ 3,657 $ 3,003
======== =======
Nine months ended September 30,
2002 2001
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Net income $ 12,287 $ 10,539
Foreign currency translation adjustments 123 (506)
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Comprehensive income $ 12,410 $ 10,033
======== ========
The components of accumulated other comprehensive income, net of related tax, at
September 30, 2002 and December 31, 2001 consist only of foreign currency
translation adjustments.
D) Earnings per Share
The calculation of dilutive weighted average shares outstanding for the three
and nine months ended September 30, 2002 and 2001 are as follows (in thousands):
Three months ended September 30,
2002 2001
---- ----
Basic weighted average shares outstanding 9,551 9,686
Dilutive impact of options outstanding 25 29
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Dilutive weighted average shares outstanding 9,576 9,715
===== =====
Nine months ended September 30,
2002 2001
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Basic weighted average shares 9,593 9,700
Dilutive impact of options outstanding 26 26
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Dilutive weighted average shares outstanding 9,619 9,726
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-5-
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 September 30, 2002.
F) Business Combination
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 various intellectual properties,
including trademarks and trade names of the divisions in certain territories.
The assets acquired were recorded at fair values based on actual purchase cost
of inventories and valuations of various intellectual properties, including
trademarks and trade names of the IPD and Kent divisions. This acquisition did
not require a significant investment by the Company in facilities or equipment.
As the Company only acquired portions of the inventory and sales professionals
of the IPD and Kent businesses, the Company is unable to provide any meaningful
pro forma information of prior period results.
G) 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 was adopted by the Company
as of January 1, 2002. The Company has completed its initial valuation of the
carrying value of the recorded goodwill as required under the statement and
determined the carrying value was appropriately recorded.
If Statement 142 had been adopted at the beginning of the first quarter of 2001,
the non-amortization of goodwill would have increased net income for the three
and nine-month periods in 2001 by approximately $266,000 to $3,579,000 ($.37 per
diluted share) and $514,000 to $11,053,000, ($1.14 per diluted share),
respectively.
Intangible assets subject to amortization, included within other assets, were as
follows (in thousands):
September 30, 2002
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Accumulated Net Carrying
Gross Balance Amortization Amount
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Trademarks and tradenames $ 1,400 $ 275 $ 1,125
Customer lists 650 24 626
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$ 2,050 $ 299 $ 1,751
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-6-
Dectember 31, 2001
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Accumulated Net Carrying
Gross Balance Amortization Amount
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Trademarks and tradenames $ 1,400 $ 137 $ 1,263
Customer lists 650 --- 650
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$ 2,050 $ 137 $ 1,913
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Trademarks and tradenames are being amortized over a weighted average 15.2
years. Customer lists are being amortized over 20 years. Amortization expense
for intangible assets is expected to be $216,000, $216,000, $116,000, $83,000
and $83,000 for 2002 and the next four years.
H) Segment Reporting
The Company has three reportable segments: Maintenance, Repair and Replacement
(MRO) distribution; Original Equipment Manufacturer (OEM) distribution and
manufacturing; and international distribution.
Financial information for the Company's reportable segments consisted of the
following:
Three Months Ended September 30,
In thousands 2002 2001
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Net sales
MRO distribution $ 78,268 $ 80,920
OEM distribution 13,914 13,445
International distribution 6,292 5,635
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Consolidated total $ 98,474 $ 100,000
========= =========
Operating income (loss)
MRO distribution $ 6,549 $ 5,199
OEM distribution 675 565
International distribution (844) 41
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Consolidated total $ 6,380 $ 5,805
========= =========
The reconciliation of segment profit to consolidated income before income taxes
consisted of the following:
Three Months Ended September 30,
In thousands 2002 2001
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Total operating income from
Reportable segments $ 6,380 $ 5,805
Investment and other income 293 297
Interest expense (45) (264)
--------- ---------
Income before income taxes $ 6,628 $ 5,838
========= =========
-7-
Nine Months Ended September 30,
In thousands 2002 2001
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Net sales
MRO distribution $ 232,927 $ 228,703
OEM distribution 42,974 39,311
International distribution 18,209 14,616
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Consolidated total $ 294,110 $ 282,630
========= =========
Operating income (loss)
MRO distribution $ 18,863 $ 16,152
OEM distribution 2,797 1,821
International distribution (1,728) (208)
--------- ---------
Consolidated total $ 19,932 $ 17,765
========= =========
The reconciliation of segment profit to consolidated income before income taxes
consisted of the following:
Nine Months Ended September 30,
In thousands 2002 2001
- --------------------------------------------------------------------
Total operating income from
Reportable segments $ 19,932 $ 17,765
Investment and other income 1,311 1,343
Interest expense (149) (518)
--------- ---------
Income before income taxes $ 21,094 $ 18,590
========= =========
Asset information related to the Company's reportable segments consisted of the
following:
September 30, December 31,
-----------------------------
In thousands 2002 2001
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Total assets
MRO distribution $ 154,503 $ 165,127
OEM distribution 33,115 34,183
International distribution 22,650 20,320
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Total for reportable segments 210,268 219,630
Corporate 13,697 13,150
--------- ---------
Consolidated total $ 223,965 $ 232,780
========= =========
At December 31, 2001, the carrying value of goodwill within each reportable
segment was as follows (in thousands):
MRO distribution $ 22,265
OEM distribution 2,251
International distribution 4,294
--------
$ 28,810
========
-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 September 30, 2002 and the related
condensed consolidated statements of income for the three month and nine month
periods ended September 30, 2002 and 2001 and the condensed consolidated
statements of cash flows for the nine month periods ended September 30, 2002 and
2001. 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, 2001, 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 28, 2002, 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, 2001, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
October 14, 2002
-9-
This Quarterly Report on Form 10-Q for the quarter ended September 30, 2002,
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. Lawson
Products, Inc. ("Lawson" or the "Company") does not undertake any obligation to
revise these forward-looking statements to reflect future events or
circumstances.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net sales for the three-month period ended September 30, 2002 decreased 1.5%,
while the nine-month period ended September 30, 2002 increased 4.1% relative to
the similar periods of 2001. Maintenance, Repair and Replacement (MRO)
distribution net sales decreased by $2.7 million in the third quarter due to
continuing difficult market conditions and a reduction in the number of sales
agents. The $4.2 million increase in year-to-date net sales for the MRO segment
is attributable to the sales generated by the addition of the field and inside
sales representatives from the IPD and Kent divisions of the North American
business of Premier Farnell, acquired March 30, 2001 (Please refer to Note F).
International distribution sales for the nine-month period were also positively
impacted by the sales of IPD and Kent in Canada, representing $2.4 million of
the segment increase of $3.6 million. Original Equipment Manufacturer (OEM) net
sales increased $0.5 million and $3.7 million for the three and nine-month
periods ended September 30, 2002, respectively. These sales gains are
attributable to increased sales from new customer development.
Operating income for the three and nine-month periods ended September 30, 2002
rose 9.9% and 12.2%, respectively, over the comparable periods of 2001.
Consistent with the first six months of 2002, the MRO, international and OEM
segments realized operating income increases resulting primarily from the higher
net sales noted above and the cessation of amortization of goodwill pursuant to
FASB Statement No. 142, while prior year results were negatively impacted by
expenses associated with the IPD/Kent acquisition. During 2002, the Company
invested in the expansion of sales and distribution activities in the
international distribution segment in the anticipation of increased sales
activity, resulting in higher operating losses as compared to the similar
periods of 2001.
Net income increased 13.5% to $3,759,000 ($.39 per diluted share) and 16.6% to
$12,287,000 ($1.28 per diluted share) for the three and nine-month periods ended
September 30, 2002, respectively, compared to the similar periods of 2001. The
increase for the third quarter resulted principally from the non-amortization of
goodwill and the absence of costs associated with the IPD/Kent acquisition,
which offset the decreased net sales discussed above. The gain for the
nine-month period is attributable to the advance in net sales, a lower effective
income tax rate, the non-amortization of goodwill and the absence of expenses
associated with the IPD/Kent acquisition. Per share net income for 2002 and 2001
was positively impacted by the Company's share repurchase program.
Cash flows provided by operations for the nine months ended September 30, 2002
were $19.7 million. The Company used $2.5 million of cash in operations for the
comparable period of 2001. The improvement in 2002 was due primarily to the net
decreases in inventories and other assets, as well as the advance in net income
noted above, which more than offset an increase in accounts receivable. In 2001,
cash flows from operations were negatively impacted by increases in operating
assets associated with the acquisition of IPD and Kent, specifically accounts
receivable, inventories and other current assets. Working capital at September
30, 2002 and 2001 was approximately $100 million and $104 million, respectively.
At September 30, 2002 the current ratio was 4.7 to 1 as compared to 3.9 to 1 at
September 30, 2001.
Additions to property, plant and equipment were $5.1 million and $4.1 million,
respectively, for the nine months ended September 30, 2002 and 2001. Consistent
with prior years, capital expenditures were incurred primarily for improvement
of existing facilities and for the purchase of related equipment as well as for
the improvement of new leased facilities.
-10-
During the first nine months of 2002, the Company purchased 175,950 shares of
its own common stock for approximately $5,041,000. Of these purchases, 173,115
shares were acquired pursuant to the 2000 Board authorization to purchase up to
500,000 shares. The additional 2,835 shares purchased during the first nine
months of 2002 represented the remaining shares authorized for purchase under
the 1999 Board authorization to purchase up to 500,000 shares. In the first nine
months of 2001, the Company purchased 73,097 shares of its own common stock for
approximately $1,935,000. These shares were acquired pursuant to the 1999 Board
authorization described above.
All shares purchased as of September 30, 2002 have been retired. Funds to
purchase these shares were provided by investments and cash flow from
operations. Current investments, cash flow 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in market risk at September 30, 2002 from
that reported in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001.
ITEM 4. CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer have concluded,
based on their evaluation within 90 days of the filing date of this report, that
our disclosure controls and procedures (as defined in Rules 13a-14(c) and
15d-14(c) under the Securities Exchange Act of 1934) are effective for
gathering, analyzing and disclosing the information we are required to disclose
in our reports filed under the Securities Exchange Act of 1934. There have been
no significant changes in our internal controls or in other factors that could
significantly affect these controls subsequent to the date of the previously
mentioned evaluation.
-11-
PART II
OTHER INFORMATION
Items 1, 2, 3, 4 and 5 are inapplicable and have been omitted from this report.
Item 6. Exhibits and Reports on Form 8-K.
(a) 15 Letter from Ernst & Young LLP Regarding Unaudited Interim
Financial Information
99.1 Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) The Company was not required to file a Current Report on Form 8-K
for the most recently completed quarter.
-12-
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 November 8, 2002 /s/ Robert J. Washlow
---------------- -----------------------------------------
Robert J. Washlow
Chief Executive Officer and
Chairman of the Board
Dated November 8, 2002 /s/ Joseph L. Pawlick
---------------- -----------------------------------------
Joseph L. Pawlick
Chief Financial Officer
(Principal Financial Officer)
-13-
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 quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 8, 2002
/s/ Robert J. Washlow
- -----------------------------
Robert J. Washlow
Chief Executive Officer
-14-
CERTIFICATIONS
- --------------
I, Joseph L. Pawlick, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Lawson Products, Inc.;
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 8, 2002
/s/ Joseph L. Pawlick
- -----------------------------
Joseph L. Pawlick
Chief Financial Officer
-15-