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Lawson Products Net Jumps 18%

Lawson Products, Inc., Des Plaines, IL, reported an 18 percent increase in net earnings to $6.6 million for the third quarter of 2005, compared to $5.6 million in the third quarter of 2004. Earnings per diluted share increased 23.7 percent to $0.73 in the third quarter of 2005, versus $0.59 per share in the same period last year. 


The increase in earnings is attributed largely to a nearly 10 percent jump in net sales this quarter, to $117.8 million, compared to sales of $107.4 million in the third quarter of 2004. The increase in net sales is the result of greater penetration of existing markets and successful pricing management programs to accommodate product cost increases.


Earlier this year, Lawson implemented targeted marketing initiatives to improve penetration in several markets serviced by the company, including government and military markets.  Throughout the third quarter, Lawson increased its penetration of existing customers and obtained new customers across its markets. 


Our management team is excited about the sales growth achieved in the latest quarter, which included higher sales growth in each consecutive month throughout the quarter," said Robert J. Washlow, Chairman and CEO.  "We believe that our customers value the ready availability of Lawson's product lines and the high level of professional service provided by our sales representatives.   Even during difficult supply environments such as we have seen in our industry since the second half of 2004, we continued to focus on maintaining a high standard of service and availability of top quality products to keep our customers businesses running at the lowest overall cost."


In addition to sales growth achieved during the third quarter, the implementation of cost management and pricing management programs resulted in enhanced gross profit margins.  Third quarter 2005 gross profit margins were 63.1 percent, compared to 62.1 percent in the prior year quarter. 


Lawson faced industry-wide increases in transportation and raw material costs over the past year, but the company's cost management programs have enabled Lawson to increase gross profit margins throughout the year in 2005, from 61.2 percent in the first quarter to 61.4 percent and 63.1 percent in the second and third quarters, respectively.  Management successfully implemented cost management programs including purchasing improvements, expense management, and changes to freight programs, while maintaining the Company's high customer service levels.  


The increase in net earnings for the third quarter 2005 was driven by operating income growth of 26.6 percent to $10.5 million, compared to $8.3 million in the prior year quarter.  Strength in operating results more than offset the slight negative impact of a higher effective tax rate caused by higher foreign operating losses in 2005 as a result of reduced business with a large customer. 


"The initiatives taken earlier this year have delivered significant results, as shown in the dramatic increase in both operating earnings and earnings per share during the third quarter," Washlow said.  "Management intends to continue to monitor the changing business environment and respond appropriately with a goal of continuing to drive profits and top-line growth."

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