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 ý No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. The terms “may,” “should,” “could,” “anticipate,” “believe,” “continues,” “estimate,” “expect,” “intend,” “objective,” “plan,” “potential,” “project” and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These statements are based on management’s current expectations, intentions or beliefs and are subject to a number of factors, assumptions and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause or contribute to such differences or that might otherwise impact the business include:


		September 30,		December 31,			March 31,		December 31,
		2020		2019			2021		2020
ASSETS	ASSETS	(Unaudited)				ASSETS	(Unaudited)
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	17,193	$	5,495	Cash and cash equivalents	$	26,293	$	28,393
Restricted cash	Restricted cash	802		802		Restricted cash	1,001		998
Accounts receivable, less allowance for doubtful accounts of $680 and $593, respectively		47,902		38,843
Accounts receivable, less allowance for doubtful accounts of $773 and $654, respectively						Accounts receivable, less allowance for doubtful accounts of $773 and $654, respectively	48,707		44,515
Inventories, net	Inventories, net	62,218		55,905		Inventories, net	60,758		61,867
Miscellaneous receivables and prepaid expenses	Miscellaneous receivables and prepaid expenses	5,943		5,377		Miscellaneous receivables and prepaid expenses	8,187		7,289
Total current assets	Total current assets	134,058		106,422		Total current assets	144,946		143,062

Property, plant and equipment, net	Property, plant and equipment, net	16,596		16,546		Property, plant and equipment, net	15,603		15,800
Goodwill	Goodwill	36,428		20,923		Goodwill	35,426		35,176
Deferred income taxes	Deferred income taxes	20,289		21,711		Deferred income taxes	19,457		18,482
Intangible assets, net	Intangible assets, net	18,727		12,335		Intangible assets, net	18,070		18,503
Cash value of life insurance	Cash value of life insurance	15,400		14,969		Cash value of life insurance	16,423		16,185
Right of use assets	Right of use assets	9,513		11,246		Right of use assets	14,453		8,764
Other assets	Other assets	258		277		Other assets	331		332
Total assets	Total assets	$	251,269	$	204,429	Total assets	$	264,709	$	256,304

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accrued acquisition liability	Accrued acquisition liability	$	32,476	$	0	Accrued acquisition liability	$	32,871	$	32,673
Accounts payable	Accounts payable	22,466		13,789		Accounts payable	19,841		22,262
Lease obligation	Lease obligation	4,509		3,830		Lease obligation	4,602		4,568
Accrued expenses and other liabilities	Accrued expenses and other liabilities	30,808		39,311		Accrued expenses and other liabilities	37,672		38,492
Total current liabilities	Total current liabilities	90,259		56,930		Total current liabilities	94,986		97,995

Revolving line of credit		0		2,271

Security bonus plan	Security bonus plan	11,540		11,840		Security bonus plan	11,159		11,262
Deferred compensation	Deferred compensation	9,847		6,370		Deferred compensation	10,820		10,461
Lease obligation	Lease obligation	6,693		9,504		Lease obligation	11,505		5,738
Deferred tax liability	Deferred tax liability	6,154		6,188		Deferred tax liability	3,523		2,841
Other liabilities	Other liabilities	5,522		3,325		Other liabilities	5,658		5,585
Total liabilities	Total liabilities	130,015		96,428		Total liabilities	137,651		133,882

Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $1 par value:	Preferred stock, $1 par value:					Preferred stock, $1 par value:
Authorized - 500,000 shares, Issued and outstanding — NaN	Authorized - 500,000 shares, Issued and outstanding — NaN	0		0		Authorized - 500,000 shares, Issued and outstanding — NaN	0		0
Common stock, $1 par value:	Common stock, $1 par value:					Common stock, $1 par value:
Authorized - 35,000,000 shares Issued - 9,231,598 and 9,190,171 shares, respectively Outstanding - 9,025,617 and 9,043,771 shares, respectively		9,232		9,190
Authorized - 35,000,000 shares Issued - 9,293,401 and 9,287,625 shares, respectively Outstanding - 9,066,547 and 9,061,039 shares, respectively						Authorized - 35,000,000 shares Issued - 9,293,401 and 9,287,625 shares, respectively Outstanding - 9,066,547 and 9,061,039 shares, respectively	9,293		9,288
Capital in excess of par value	Capital in excess of par value	19,508		18,077		Capital in excess of par value	20,258		19,841
Retained earnings	Retained earnings	101,386		86,496		Retained earnings	105,205		101,609
Treasury stock – 205,981 and 146,400 shares, respectively		(7,953)		(5,761)
Accumulated other comprehensive loss		(919)		(1)
Treasury stock – 226,854 and 226,586 shares, respectively						Treasury stock – 226,854 and 226,586 shares, respectively	(9,028)		(9,015)
Accumulated other comprehensive income						Accumulated other comprehensive income	1,330		699
Total stockholders’ equity	Total stockholders’ equity	121,254		108,001		Total stockholders’ equity	127,058		122,422
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	251,269	$	204,429	Total liabilities and stockholders’ equity	$	264,709	$	256,304


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020

Total revenue	Total revenue	$	90,277	$	94,779	$	253,458	$	282,219	Total revenue	$	103,556	$	91,035

Cost of goods sold	Cost of goods sold	43,052		44,205		118,999		131,679		Cost of goods sold	48,996		42,114
Gross profit	Gross profit	47,225		50,574		134,459		150,540		Gross profit	54,560		48,921

Operating expenses:	Operating expenses:									Operating expenses:
Selling expenses	Selling expenses	19,155		21,255		55,445		64,864		Selling expenses	23,802		19,984
General and administrative expenses	General and administrative expenses	26,069		22,873		57,806		72,063		General and administrative expenses	25,948		10,299
Operating expenses	Operating expenses	45,224		44,128		113,251		136,927		Operating expenses	49,750		30,283

Operating income	Operating income	2,001		6,446		21,208		13,613		Operating income	4,810		18,638

Interest expense	Interest expense	(142)		(138)		(329)		(481)		Interest expense	(323)		(115)
Other income (expense), net	Other income (expense), net	615		(13)		15		798		Other income (expense), net	372		(1,111)

Income before income taxes	Income before income taxes	2,474		6,295		20,894		13,930		Income before income taxes	4,859		17,412
Income tax expense	Income tax expense	736		1,521		6,004		3,703		Income tax expense	1,263		4,879

Net income	Net income	$	1,738	$	4,774	$	14,890	$	10,227	Net income	$	3,596	$	12,533

Basic income per share of common stock	Basic income per share of common stock	$	0.19	$	0.53	$	1.65	$	1.14	Basic income per share of common stock	$	0.40	$	1.39

Diluted income per share of common stock	Diluted income per share of common stock	$	0.19	$	0.51	$	1.60	$	1.09	Diluted income per share of common stock	$	0.39	$	1.34

Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic weighted average shares outstanding	Basic weighted average shares outstanding	9,017		8,974		9,017		8,971		Basic weighted average shares outstanding	9,063		9,032
Effect of dilutive securities outstanding	Effect of dilutive securities outstanding	313		415		312		399		Effect of dilutive securities outstanding	265		302
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	9,330		9,389		9,329		9,370		Diluted weighted average shares outstanding	9,328		9,334

Comprehensive income:	Comprehensive income:									Comprehensive income:
Net income	Net income	$	1,738	$	4,774	$	14,890	$	10,227	Net income	$	3,596	$	12,533
Other comprehensive income, net of tax
Other comprehensive income (expense), net of tax										Other comprehensive income (expense), net of tax
Adjustment for foreign currency translation	Adjustment for foreign currency translation	398		(427)		(918)		965		Adjustment for foreign currency translation	631		(2,494)
Net comprehensive income	Net comprehensive income	$	2,136	$	4,347	$	13,972	$	11,192	Net comprehensive income	$	4,227	$	10,039


		Common Stock			Capital in Excess of Par Value												Accumulated Other Comprehensive Income (Loss)					Total Stockholders' Equity			Common Stock					Capital in Excess of Par Value									Accumulated Other Comprehensive Income			Total Stockholders' Equity
		Outstanding Shares	td Par Value				Retained Earnings				Treasury Stock										Outstanding Shares					td Par Value			Retained Earnings				Treasury Stock
Balance at January 1, 2020		9,043,771	$	9,190			$	18,077			$	86,496			$	(5,761)			$	(1)					$	108,001

Net income		—	—		—				12,533				—				—					12,533
Treasury shares repurchased		(47,504)	—		—				—				(1,756)				—					(1,756)
Adjustment for foreign currency translation		—	—		—				—				—				(2,494)					(2,494)
Stock-based compensation		—	—		451				—				—				—					451
Balance at March 31, 2020		8,996,267	9,190		18,528				99,029				(7,517)				(2,495)					116,735
Balance at December 31, 2020																								Balance at December 31, 2020	9,061,039		$	9,288			$	19,841		$	101,609		$	(9,015)		$	699		$	122,422

Net income	Net income	—	—		—				619				—				—					619		Net income	—		—			—			3,596			—			—			3,596
Adjustment for foreign currency translation	Adjustment for foreign currency translation	—	—		—				—				—				1,178					1,178		Adjustment for foreign currency translation	—		—			—			—			—			631			631
Stock-based compensation	Stock-based compensation	—	—		498				—				—				—					498		Stock-based compensation	—		—			422			—			—			—			422
Shares issued	Shares issued	11,144	11		3				—				—				—					14		Shares issued	5,776		5			(5)			—			—			—			0
Balance at June 30, 2020		9,007,411	$	9,201	$	19,029			$	99,648			$	(7,517)			$	(1,317)				$	119,044

Net income		—	$	—	$	—			$	1,738			$	—			$	—				$	1,738
Treasury shares repurchased		(12,077)	—		—				—				(436)				—					(436)
Adjustment for foreign currency translation		—	—		—				—				—				398					398
Stock-based compensation		—	—		510				—				—				—					510
Shares issued		30,283	31		(31)				—				—				—					0
Balance at September 30, 2020		9,025,617	$	9,232	$	19,508			$	101,386			$	(7,953)			$	(919)				$	121,254
Shares repurchased held in treasury																								Shares repurchased held in treasury	(268)		—			—			—			(13)			—			(13)
Balance at March 31, 2021																								Balance at March 31, 2021	9,066,547		$	9,293		$	20,258		$	105,205		$	(9,028)		$	1,330		$	127,058


		Common Stock			Capital in Excess of Par Value												Accumulated Other Comprehensive Income (Loss)					Total Stockholders' Equity			Common Stock					Capital in Excess of Par Value									Accumulated Other Comprehensive Loss			Total Stockholders' Equity
		Outstanding Shares	td Par Value				Retained Earnings				Treasury Stock										Outstanding Shares					td Par Value			Retained Earnings				Treasury Stock
Balance at January 1, 2019		8,955,930	$	9,006			$	15,623			$	77,338			$	(1,234)			$	(1,560)					$	99,173
Balance at December 31, 2019																								Balance at December 31, 2019	9,043,771		$	9,190			$	18,077		$	86,496		$	(5,761)		$	(1)		$	108,001

Change in accounting principle (1)		—	—		—				1,937				—				—					1,937
Net income	Net income	—	—		—				4,146				—				—					4,146		Net income	—		—			—			12,533			—			—			12,533
Shares repurchased held in treasury																								Shares repurchased held in treasury	(47,504)		—			—			—			(1,756)			—			(1,756)
Adjustment for foreign currency translation	Adjustment for foreign currency translation	—	—		—				—				—				675					675		Adjustment for foreign currency translation	—		—			—			—			—			(2,494)			(2,494)
Stock-based compensation	Stock-based compensation	—	—		666				—				—				—					666		Stock-based compensation	—		—			451			—			—			—			451
Shares issued		6,520	6		(6)				—				—				—					0
Balance at March 31, 2019		8,962,450	9,012		16,283				83,421				(1,234)				(885)					106,597

Net income		—	—		—				1,307				—				—					1,307
Adjustment for foreign currency translation		—	—		—				—				—				717					717
Stock-based compensation		—	—		711				—				—				—					711
Shares issued		20,712	21		(21)				—				—				—					0
Balance at June 30, 2019		8,983,162	$	9,033	$	16,973			$	84,728			$	(1,234)			$	(168)				$	109,332

Net income		—	$	—	$	—			$	4,774			$	—			$	—				$	4,774
Treasury shares repurchased		(35,830)	—		—				—				(1,361)				—					(1,361)
Adjustment for foreign currency translation		—	—		—				—				—				(427)					(427)
Stock-based compensation		—	—		663				—				—				—					663
Shares issued		9,649	10		(10)				—				—				—					0
Balance at September 30, 2019		8,956,981	$	9,043	$	17,626			$	89,502			$	(2,595)			$	(595)				$	112,981
Balance at March 31, 2020																								Balance at March 31, 2020	8,996,267		$	9,190		$	18,528		$	99,029		$	(7,517)		$	(2,495)		$	116,735


		Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019			2021		2020

Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	14,890	$	10,227	Net income	$	3,596	$	12,533

Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash used in operating activities:						Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	4,660		4,401		Depreciation and amortization	1,935		1,509
Stock-based compensation	Stock-based compensation	(2,767)		7,621		Stock-based compensation	944		(10,700)
Deferred income taxes	Deferred income taxes	1,454		3,252		Deferred income taxes	(320)		3,196
Changes in operating assets and liabilities, net of acquisition	Changes in operating assets and liabilities, net of acquisition					Changes in operating assets and liabilities, net of acquisition
Accounts receivable	Accounts receivable	(2,128)		(7,785)		Accounts receivable	(4,426)		(3,528)
Inventories	Inventories	1,101		(1,593)		Inventories	1,315		(1,500)
Prepaid expenses and other assets		(725)		(2,433)
Miscellaneous receivables, prepaid expenses and other assets						Miscellaneous receivables, prepaid expenses and other assets	(1,148)		(223)
Accounts payable and other liabilities	Accounts payable and other liabilities	3,097		(6,193)		Accounts payable and other liabilities	(3,733)		(8,486)
Other	Other	441		544		Other	361		311
Net cash provided by operating activities		$	20,023	$	8,041
Net cash used in operating activities						Net cash used in operating activities	$	(1,476)	$	(6,888)

Investing activities:	Investing activities:					Investing activities:
Purchases of property, plant and equipment	Purchases of property, plant and equipment	$	(1,311)	$	(1,392)	Purchases of property, plant and equipment	$	(849)	$	(551)
Cash paid for acquisition		(2,300)		0
Cash receipt related to acquisition						Cash receipt related to acquisition	188		0
Net cash used in investing activities	Net cash used in investing activities	$	(3,611)	$	(1,392)	Net cash used in investing activities	$	(661)	$	(551)

Financing activities:	Financing activities:					Financing activities:
Net payments on revolving line of credit		$	(2,271)	$	(8,628)
Net proceeds from revolving line of credit						Net proceeds from revolving line of credit	$	0	$	8,189
Repurchase treasury shares	Repurchase treasury shares	(2,192)		(1,361)		Repurchase treasury shares	(13)		(1,756)
Payment of financing lease principal	Payment of financing lease principal	(192)		(192)		Payment of financing lease principal	(58)		(67)
Proceeds from stock option exercises		15		16
Net cash used in financing activities		$	(4,640)	$	(10,165)
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	$	(71)	$	6,366

Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	$	(74)	$	259	Effect of exchange rate changes on cash and cash equivalents	$	111	$	(327)

Increase (decrease) in cash, cash equivalents and restricted cash		11,698		(3,257)
Decrease in cash, cash equivalents and restricted cash						Decrease in cash, cash equivalents and restricted cash	(2,097)		(1,400)

Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	6,297		12,683		Cash, cash equivalents and restricted cash at beginning of period	29,391		6,297

Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	17,995	$	9,426	Cash, cash equivalents and restricted cash at end of period	$	27,294	$	4,897

Cash and cash equivalents	Cash and cash equivalents	$	17,193	$	8,626	Cash and cash equivalents	$	26,293	$	4,095
Restricted cash	Restricted cash	802		800		Restricted cash	1,001		802
Cash, cash equivalents and restricted cash	Cash, cash equivalents and restricted cash	$	17,995	$	9,426	Cash, cash equivalents and restricted cash	$	27,294	$	4,897

Supplemental disclosure of cash flow information	Supplemental disclosure of cash flow information					Supplemental disclosure of cash flow information
Net cash paid for income taxes	Net cash paid for income taxes	3,733		458		Net cash paid for income taxes	$	378	$	198
Net cash paid for interest	Net cash paid for interest	295		499		Net cash paid for interest	$	134	$	147

The accompanying unaudited condensed consolidated financial statements of Lawson Products, Inc. (the “Company”) have been prepared in accordance with generally accepted accounting principles for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not contain all disclosures required by generally accepted accounting principles. Reference should be made to the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. In the opinion of the Company, all normal recurring adjustments have been made that are necessary to present fairly the results of operations for the interim periods. Operating results for the three ~~and nine~~ month ~~periods~~period ended ~~September 30, 2020~~March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020.~~2021.

The Company has 2 operating segments. The ~~first segment, the~~ Lawson operating segment, distributes maintenance, repair and operations ("MRO") products to customers primarily through a network of sales representatives offering vendor managed inventory ("VMI") service to customers throughout the United States and Canada. The ~~second segment, The~~ Bolt Supply House Ltd. ("Bolt Supply") operating segment, distributes MRO products primarily through its branches located in Western Canada. Bolt Supply had 14 ~~branches~~branches in operation at the end of the ~~third~~first quarter ~~2020.~~2021. See the 2020 Annual Report Form 10K for further details of the significant accounting policies of the Company.

On August 31, 2020, the Company acquired Partsmaster from NCH Corporation. Partsmaster is a leading maintenance, MRO solutions provider that serves approximately 16,000 customers with ~~over~~approximately 200 sales representatives. The acquisition was made primarily to expand the Company's sales coverage, expand product lines, add experienced sales representatives, and leverage the Company's infrastructure.

The purchase price was $35.3 million in cash ~~and~~plus the assumption of certain liabilities. The Company paid $2.3 million of the purchase price in cash at closing and will pay the remaining $33.0 million in May 2021. The payment obligation has been discounted to present value and is recognized as an accrued acquisition liability of ~~$32.5~~$32.7 million and $32.9 million as of December 31, 2020 and March 31, 2021, respectively, in the Company's condensed consolidated balance sheet. Interest expense of $0.2 million was recorded in the three months ended March 31, 2021. Payment has been guaranteed under the Purchase Agreement, and includes the issuance of a $33.0 million irrevocable standby letter of credit. The Company will satisfy the payment obligation with cash on hand ~~and, to the extent necessary,~~with any remaining portion using its existing credit facility.

The purchase price of the acquisition was allocated to the fair value of Partsmaster’s assets and liabilities on the acquisition date. The fair market value appraisals of the majority of the assets and liabilities ~~were~~was determined by a third party valuation firm using management estimates and assumptions including intangible assets of $5.0 million for customer relationships and $2.8 million for trade names, and their estimated useful lives of 10 and 5 years, respectively. The ~~$16.0~~$15.8 million allocated to goodwill reflects the purchase price less the fair market value of the identifiable net assets. The goodwill is attributable to the workforce of the acquired business and the synergies expected to arise after Lawson's acquisition of Partsmaster. The entire amount of goodwill is expected to be deductible for tax purposes.

The appropriate fair values of the assets acquired and liabilities assumed are based on preliminary estimates and assumptions. The Company continues to review preliminary estimates of various assets and liabilities including, but not limited to, pre-acquisition employee compensation liabilities and potential adjustments of certain accounts receivable balances as defined under the purchase agreement. These preliminary estimates and assumptions could change ~~significantly~~ during the purchase price measurement period as the Company finalizes the valuations of the assets acquired and liabilities assumed. The Company recorded the fair value of accounts receivable after consideration of an estimate of cash flows not expected to be collected which was $0.4 million.


Cash paid and payable and liabilities assumed
Cash paid and payable	$	~~34,711~~34,523
Accounts payable and accrued expenses	~~4,076~~4,086
Deferred compensation	2,938
Lease obligation	620
	$	~~41,725~~42,167
Fair value of assets acquired
Goodwill	$	~~15,952~~15,816
Inventories	~~7,809~~7,797
Accounts receivable	~~7,656~~7,706
Customer relationships	4,961
Trade names	2,775
Property, plant and equipment	~~2,201~~2,121
Right of use asset	620
Other assets	371
	$	~~41,725~~42,167

The unaudited pro forma revenue and net income for the Company for the three months ended March 31, 2020, assuming the Partsmaster acquisition closed on January 1, 2019, was $106.2 million and $12.9 million, respectively. The pro forma disclosures ~~in the table above~~ include adjustments for amortization of intangible assets, implied interest expense and acquisition costs to reflect results as if the acquisition of Partsmaster had closed on January 1, 2019 rather than on the actual acquisition date. This pro forma information utilizes certain estimates, is presented for illustrative purposes only and is not intended to be indicative of the actual results of operation. In addition, future results may vary significantly from the results reflected in the pro forma information. The unaudited pro forma financial information does not reflect the impact of future positive or negative events that may occur after the acquisition, such as anticipated cost savings from operating synergies.

As part of the Company's revenue recognition analysis, it concluded that it has two separate performance obligations, and accordingly, two separate revenue streams: products and services. Under the definition of a contract as defined by ASC 606, the Company considers contracts to be created at the time an order to purchase product is agreed upon regardless of whether or not there is a written contract.

The Lawson segment has two distinct performance obligations offered to its customers: a product performance obligation and a service performance obligation. ~~Although~~While the Company ~~has identified that it~~ offers ~~its customers~~ both a product and a service obligation, ~~the customer only receives~~customers receive one invoice per transaction with no price breakout between these obligations. The Company does not separately price performance obligations.

Lawson generates revenue primarily from the sale of MRO products to its ~~offerings based on any breakout between these obligations.~~customers. Revenues related to product sales is recognized at the time that control of the product has been transferred to the customer, either at the time the product is shipped or the time the product has been received by the customer. The Company does not commit to long-term contracts to sell customers a certain minimum quantity of products.

The Lawson segment, including the recent Partsmaster acquisition, offers a vendor managed inventory ("VMI") service proposition to its customers. A portion of these services, primarily related to stocking of product and maintenance of the MRO inventory, is provided a short period of time after control of the purchased product has been transferred to the customer. Since some components of VMI service have not been provided at the time the control of the product transfers to the customer, that portion of expected consideration is deferred until the time that those services have been provided.

The Bolt Supply segment provides product sales and does not provide VMI services ~~for its customers~~ or ~~provide services in addition~~other services. Revenue is recognized at the time that control of the product has been transferred to ~~product sales to customers.~~the customer which is either upon delivery or shipment depending on the terms with the customer.

In previous financial statements, the Company presented the disaggregated components of total revenue: product revenue and service revenue, along with the cost of sales associated with each of these revenue streams as the service revenues exceeded 10% of consolidated ~~sales.~~revenue. Since the Company qualifies as a smaller reporting company, the Company has elected to discontinue disclosure of the disaggregated components of revenue and cost of sales in its condensed consolidated statements of income and comprehensive income and in the related notes to the condensed consolidated financial statements. ~~This presentation decision is effective beginning with this~~ ~~Quarterly Report on Form 10-Q for the period ended September 30, 2020.~~ For the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, service revenue of ~~$10.3~~$9.7 million ~~and $29.9 million, respectively, were~~ was reported as service revenue which ~~have~~has now been combined asand reported within total revenue.

Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands) 2020 2019 2020 2019
United States $ 72,030 $ 75,160 $ 202,709 $ 225,327
Canada 18,247 19,619 50,749 56,892
Consolidated total $ 90,277 $ 94,779 $ 253,458 $ 282,219


	Three Months Ended March 31,
	2021		2020

Fastening Systems	21.0	%	22.8	%
Cutting Tools and Abrasives	14.9	%	13.3	%
Fluid Power	13.4	%	14.2	%
Electrical	10.6	%	10.8	%
Specialty Chemicals	9.7	%	11.2	%
Aftermarket Automotive Supplies	6.8	%	8.2	%
Safety	4.9	%	6.3	%
Welding and Metal Repair	1.7	%	1.4	%
Other	17.0	%	11.8	%
Consolidated Total	100.0%		100.0%

Prior to acquisition, Partsmaster leased parts washer machines to customers through its Torrents leasing program. The Torrents leasing program comprised a minor portion of the Partsmaster business. The Company will continue the leasing program for the foreseeable future. These leases are classified as operating leases. The leased machines are recognized as fixed assets on the Company's consolidated balance sheet and the leasing revenue ~~by product type follows:~~is recognized on a straight line basis. The Torrents machine leasing program generated $0.7 million of revenue in the first three months of 2021. The Company has adopted the practical expedient not to separate non-lease components that would be within the scope of ASC 606 from the associated lease components as the relevant criteria under ASC 842 are met.

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Fastening Systems 22.3 % 24.1 % 22.7 % 24.0 %
Specialty Chemicals 13.3 % 11.7 % 11.7 % 11.6 %
Fluid Power 12.6 % 15.1 % 13.2 % 15.2 %
Cutting Tools and Abrasives 12.2 % 13.1 % 13.1 % 13.1 %
Electrical 10.0 % 10.4 % 10.2 % 10.8 %
Safety 7.0 % 4.7 % 6.4 % 4.7 %
Aftermarket Automotive Supplies 7.0 % 7.6 % 7.1 % 7.9 %
Welding and Metal Repair 1.4 % 1.3 % 1.4 % 1.5 %
Other 14.2 % 12.0 % 14.2 % 11.2 %
Consolidated Total 100.0% 100.0% 100.0% 100.0%

The Company has agreed to maintain $0.8 million in a money market account as collateral for an outside party that is providing certain commercial card processing services for the Company. The Company has also agreed to maintain $0.2 million in a guaranteed investment certificate as collateral for an outside party that is providing certain commercial credit card services for Bolt. The Company is restricted from withdrawing this balance without the prior consent of the outside party during the term of the agreement.


		(Dollars in thousands)					(Dollars in thousands)
		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Inventories, gross	Inventories, gross	$	67,083	$	60,500	Inventories, gross	$	67,252	$	67,137
Reserve for obsolete and excess inventory	Reserve for obsolete and excess inventory	(4,865)		(4,595)		Reserve for obsolete and excess inventory	(6,494)		(5,270)
Inventories, net	Inventories, net	$	62,218	$	55,905	Inventories, net	$	60,758	$	61,867

June 30, 2020 goodwill allocated to the Bolt operating unit was $12.8 million. Related to the Lawson reporting unit, the Company performed a qualitative assessment as of March 31, 2020 and June 30, 2020 and determined that it was more likely than not the fair value of the reporting unit exceeded the carrying value of the reporting unit. The Company determined that no triggering event occurredis included in the ~~third quarter.~~table below:

Although the Company believes the projected future operating results and cash flows and related estimates regarding the values were based on reasonable assumptions, it is reasonably possible that estimates made may be materially and adversely impacted in the near term as a result of the COVID-19 pandemic, including impairment losses related to goodwill.


	(Dollars in Thousands)
	Goodwill By Reportable Segment
	Lawson		Bolt		Total
Beginning balance December 31, 2019	$	7,369	$	13,554	$	20,923
Impact of foreign exchange	(194)		(1,174)		(1,368)
Balance at March 31, 2020	$	7,175	$	12,380	$	19,555


		(Dollars in thousands)													(Dollars in thousands)
		September 30, 2020						December 31, 2019							March 31, 2021						December 31, 2020
		Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Gross Carrying Amount		Accumulated Amortization		Net Carrying Value			Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Trade names	Trade names	$	11,022	$	(2,436)	$	8,586	$	8,422	$	(2,020)	$	6,402	Trade names	$	11,432	$	(3,079)	$	8,353	$	11,289	$	(2,733)	$	8,556
Customer relationships	Customer relationships	12,181		(2,040)		10,141		7,337		(1,404)		5,933		Customer relationships	12,456		(2,739)		9,717		12,349		(2,402)		9,947
		$	23,203	$	(4,476)	$	18,727	$	15,759	$	(3,424)	$	12,335		$	23,888	$	(5,818)	$	18,070	$	23,638	$	(5,135)	$	18,503

The Company leases ~~property used for~~equipment, distribution centers, office space, and ~~Bolt~~ branch locations throughout the US and Canada, along with various equipment located in distribution centers and corporate headquarters. The Company is also a lessor of its Decatur, Alabama property previously used in conjunction with a discontinued operation.Canada.

Lease Type Classification Three Months Ended September 30, 2020 Three Months Ended September 30, 2019
Consolidated Operating Lease Expense (1)
Operating expenses $ 1,262 $ 1,190
Consolidated Financing Lease Amortization Operating expenses 63 $ 60
Consolidated Financing Lease Interest Interest expense 8 10
Consolidated Financing Lease Expense 71 70
Sublease Income (2)
Operating expenses 0 0
Net Lease Cost $ 1,333 $ 1,260

Lease Type Classification Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019
Consolidated Operating Lease Expense (1)
Operating expenses $ 3,630 $ 3,532
Consolidated Financing Lease Amortization Operating expenses 165 159
Consolidated Financing Lease Interest Interest expense 22 23
Consolidated Financing Lease Expense 187 182
Sublease Income (2)
Operating expenses 0 (160)
Net Lease Cost $ 3,817 $ 3,554


		Three Months Ended March 31,
Lease Type	Classification	2021		2020

Operating Lease Expense	Operating expenses	$	1,493	$	1,187

Financing Lease Amortization	Operating expenses	58		$	52

Financing Lease Interest	Interest expense	5		7

Financing Lease Expense		63		59

Net Lease Cost		$	1,556	$	1,246


Lease Type	Lease Type	September 30, 2020		December 31, 2019		Lease Type	March 31, 2021		December 31, 2020

Total Right Of Use ("ROU") operating lease assets (1)	Total Right Of Use ("ROU") operating lease assets (1)	$	8,938	$	10,592	Total Right Of Use ("ROU") operating lease assets (1)	$	13,993	$	8,246
Total ROU financing lease assets (2)	Total ROU financing lease assets (2)	575		654		Total ROU financing lease assets (2)	460		518
Total lease assets	Total lease assets	$	9,513	$	11,246	Total lease assets	$	14,453	$	8,764

Total current operating lease obligation	Total current operating lease obligation	$	4,276	$	3,591	Total current operating lease obligation	$	4,378	$	4,360
Total current financing lease obligation	Total current financing lease obligation	233		239		Total current financing lease obligation	224		208
Total current lease obligations	Total current lease obligations	$	4,509	$	3,830	Total current lease obligations	$	4,602	$	4,568

Total long term operating lease obligation	Total long term operating lease obligation	$	6,414	$	9,133	Total long term operating lease obligation	$	11,346	$	5,498
Total long term financing lease obligation	Total long term financing lease obligation	279		371		Total long term financing lease obligation	159		240
Total long term lease obligation	Total long term lease obligation	$	6,693	$	9,504	Total long term lease obligation	$	11,505	$	5,738


Maturity Date of Lease Liabilities	Maturity Date of Lease Liabilities	Operating Leases		Financing Leases		Total		Maturity Date of Lease Liabilities	Operating Leases		Financing Leases		Total

Year one	Year one	$	4,599	$	254	$	4,853	Year one	$	4,829	$	196	$	5,025
Year two	Year two	3,780		153		3,933		Year two	4,250		132		4,382
Year three	Year three	1,733		101		1,834		Year three	3,178		64		3,242
Year four	Year four	720		35		755		Year four	2,418		13		2,431
Year five	Year five	175		2		177		Year five	809		0		809
Subsequent years	Subsequent years	471		0		471		Subsequent years	1,416		0		1,416
Total lease payments	Total lease payments	11,478		545		12,023		Total lease payments	16,900		405		17,305
Less: Interest	Less: Interest	788		33		821		Less: Interest	1,176		22		1,198
Present value of lease liabilities	Present value of lease liabilities	$	10,690	$	512	$	11,202	Present value of lease liabilities	$	15,724	$	383	$	16,107

Lease Type

Weighted Average Term in Years

Weighted Average Interest Rate

Lease Type

Weighted Average Term in Years

Weighted Average Interest Rate

Operating Leases

3.1

5.08%

Operating Leases

3.0

3.72%

Financing Leases

2.7

5.37%

Financing Leases

2.4

5.24%

Prior to acquisition, Partsmaster leased parts washer machines to customers through its Torrents leasing program. The Torrents leasing program comprised a minor portion of the Partsmaster business. The Company will continue the leasing program for the foreseeable future. These leases are classified as operating leases. The leased machines are recognized as fixed assets on the Company's consolidated balance sheet and the leasing revenue is recognized on a straight line basis. The Torrents machine leasing program generated $0.7 million of revenue in the first three months of 2021. The Company has adopted the practical expedient not to separate non-lease components that would be within the scope of ASC 606 from the associated lease components as the relevant criteria under ASC 842 are met.

In the fourth quarter of 2019, the Company entered into a five-year credit agreement led by J.P. Morgan Chase Bank N.A, as administrative agent and including CIBC Bank USA and Bank of America, N.A. as other lenders. The ~~credit agreement~~Revolving Credit Facility matures on October 11, 2024 and provides ~~for~~ $100.0 million of revolving commitments. The ~~credit agreement allows~~facility is primarily for general corporate purposes. The Company had $64.4 million of borrowing ~~capacity to increase to $150.0~~availability under its Revolving Credit Facility as of March 31, 2021 and $66.0 million ~~subject to meeting certain criteria~~as of December 31, 2020.There were no balances outstanding for the three months ended March 31, 2021 and ~~additional commitments from its lenders.~~as of December 31, 2020. Weighted average interest rates for the three months ended March 31, 2020 was 4.04%,.

~~The~~Fees are reported as interest expense and include customary charges relating to letters of credit and an unutilized commitment fee ranging from 0.15% to 0.30%, depending on the Total Net Leverage Ratio as defined in the Credit ~~Agreement consists~~Agreement. Fees for the three months ended March 31, 2021 and March 31, 2020 were $0.1 million.

In connection with the Revolving Credit Facility originated in 2019, deferred financing costs of ~~borrowings~~$0.6 million were incurred. Deferred financing costs are amortized over the life of the debt instrument and reported as interest expense. As of March 31, 2021 and December 31, 2020 deferred financing costs net of accumulated amortization were $0.4 million and are included in Other assets.

Borrowings are designed as alternate base rate loans, Canadian prime rate loans, Eurodollar loans, and Canadian dollar offered rate ~~loans as the Company requests. The applicable interest rate spread is determined~~loans. Interest rates vary by the type of borrowing ~~used~~ and ~~the~~ Total Net Leverage Ratio as defined in the Credit Agreement of the most recent fiscal ~~quarter as defined in the Credit Agreement.~~quarter.

~~The covenants associated with the~~Revolving Credit Agreement restrict the ability of the Company to, among other things: incur additional indebtedness and liens, make certain investments, merge or consolidate, engage in certain transactions such as the disposition of assets and sales-leaseback transactions, and make certain restricted cash payments such as dividends in excess of defined amounts contained within the Credit Agreement. In addition to these items and otherFacility includes customary ~~terms and conditions, the Credit Agreement requires the Company to comply with certain~~ financial covenants ~~as follows:~~

~~During~~In the third quarter of 2020 the Company entered into an amendment to the Credit Agreement which among other items temporarily increased the allowed letter of ~~credit basket~~credits from $15.0 million to $40.0 million until August 31, 2021 and authorized ~~the Company~~indebtedness not to ~~incur indebtedness in an amount up to~~exceed $36.0 million for the acquisition of Partsmaster.

On August 31, 2020, Lawson acquired Partsmaster from NCH Corporation. As part of the purchase price the Company agreed to pay $33.0 million in May 2021. The payment obligation has been discounted to present value using an implied interest rate of 1.8% and is recognized as a current liability of ~~$32.5~~$32.7 million and $32.9 million as of December 31, 2020 and March 31, 2021, respectively,in the Company's condensed consolidated balance sheet. Interest expense of $0.2 million was recorded in the three months ended March 31, 2021. The increase in accrued acquisition liability has been recognized as interest expense. Payment has been guaranteed under the Purchase Agreement which includes the issuance of a $33.0 million irrevocable standby letter of credit. The accrued acquisition liability is included as outstanding debt in the quarterly financial covenant calculations.

In the second quarter of 2019, the Board of Directors authorized a program in which the Company may repurchase up to $7.5 million of the Company's common stock from time to time in open market transactions, privately negotiated transactions or by other methods. ~~In the first quarter~~The Company had $4.5 million remaining under its repurchase plan as of ~~2020 the Company purchased 47,504 shares of common stock at an average purchase price of $36.93 under the repurchase program.~~March 31, 2021. No shares were repurchased in the ~~second or third quarters~~first quarter of ~~2020~~2021 under the Company stock repurchase plan.


		(Dollars in thousands)					(Dollars in thousands)
		Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019			2021		2020
Balance at beginning of period	Balance at beginning of period	$	909	$	359	Balance at beginning of period	$	1,251	$	909
Charged to earnings	Charged to earnings	1,520		1,542		Charged to earnings	404		7
Payments	Payments	(1,239)		(925)		Payments	(340)		(365)
Balance at end of period	Balance at end of period	$	1,190	$	976	Balance at end of period	$	1,315	$	551

The Company recorded stock-based compensation ~~inc~~expense~~ome~~ of ~~$2.8~~$1.0 million and ~~expense~~benefit of ~~$7.6~~$10.7 million for the first ~~nine~~three months of ~~2020~~2021 and ~~2019,~~2020, respectively. A portion of stock-based compensation is related to the change in the market value of the Company's common stock. Stock-based compensation liability of ~~$10.4~~$15.0 million as of ~~September 30, 2020~~March 31, 2021 and ~~$14.9~~$14.4 million as of December 31, ~~2019~~2020 is included in Accrued expenses and other liabilities.

The Company issued ~~6,847~~7,300 RSUs to key employees that cliff vest on December 31, ~~2022. The~~2023. Additionally the Company issued ~~2,500~~26,850 RSUs to ~~an executive~~various employees that ~~cliff~~ vest ~~on March 2, 2023 and 3,000 RSUs that cliff vest on March 9, 2023.~~ratably through December 31, 2024. ~~The Company issued 10,965 RSUs to certain members of the Company's Board of Directors with a vesting date of May 12, 2021.~~ Each RSU is exchangeable for ~~one~~1 share of the Company's common stock at the end of the vesting period.

The Company issued ~~22,284~~18,373 MSUs to key employees that cliff vest on December 31, ~~2022.~~2023. MSUs are exchangeable for the Company's common stock at the end of the vesting period. The number of shares of common stock that will be issued upon vesting, ranging from 0 to ~~33,426,~~27,560 shares, will be determined based upon the trailing sixty-day average closing price of the Company's common stock on December 31, ~~2022.~~2023.

The Company recorded income tax expense of ~~$6.0~~$1.3 million, a ~~28.7%~~26.0% effective tax rate for the ~~nine~~three months ended ~~September 30,~~March 31, 2021. The effective tax rate is higher than the U.S. statutory rate due primarily to state taxes and other permanent items. Income tax expense of $4.9 million, a 28.0% effective tax rate was recorded for the three months ended March 31, 2020. The effective tax rate is higher than the U.S. statutory ~~tax~~ rate due primarily to state taxes and the recording of reserves for uncertain tax positions, and an inclusion for Global Intangible Low Taxed Income. Income tax expense of $3.7 million, a 26.6% effective tax rate was recorded for the nine months ended September 30, 2019. This effective tax rate was higher than the U.S. statutory rate due primarily to state taxes, income in higher tax jurisdictions and an inclusion for Global Intangible Low Tax Income.positions.

The Company and its subsidiaries are subject to U.S. Federal income tax, as well as income tax of multiple state and foreign jurisdictions. As of ~~September 30, 2020,~~March 31, 2021, the Company is subject to U.S. Federal income tax examinations for the years 2017 through 2019 and income tax examinations from various other jurisdictions for the years 2013 through 2019.

In 2012, ~~the~~it was determined a Company ~~identified that a~~owned site ~~it owns~~ in Decatur, Alabama, ~~contains~~contained hazardous substances in the soil and groundwater as a result of historical operations prior to the Company's ownership. The Company retained an environmental consulting firm to further investigate the contamination, ~~including~~prepare a remediation plan, and enroll the ~~measurement and monitoring of the~~ site ~~and the site was enrolled~~ in the Alabama Department of Environmental Management (“ADEM") voluntary cleanup program.

The remediation plan, ~~was~~ approved by ADEM in ~~2018. The plan~~2018, consists of chemical injections throughout the affected area ~~as well as~~and subsequent ~~monitoring of the area for three consecutive periods.~~monitoring. The injection process was completed in the first quarter of 2019 and ~~the environmental consulting firm~~monitoring is ongoing pending certification by ADEM. At March 31, 2021 estimated costs for future monitoring ~~the affected area. The Company utilized its remaining liability balance in the third quarter of 2020. there may be some additional nominal filing fees that~~ are ~~charged to the Company by the environmental consulting firm~~not significant and ~~ADEM, however these amounts are expected to be immaterial and will be expensed as incurred.~~have been fully accrued. The Company does not expect to capitalize any amounts related to the remediation plan.

During the three and nine months ended September 30, 2020 the Company purchased approximately $0.7 million and $0.9 million, respectively, of inventory from a company owned by an immediate relative of a Board member at fair market value. The Company paid substantially all of the amount owed in the third quarter and therefore immaterial remaining liabilities exist as of September 30, 2020.

The ~~Company operates in 2 reportable segments. The businesses have been determined to be separate~~Company's operating segments, Lawson and Bolt, also represent its reportable segments because of differences in ~~their~~the businesses' financial characteristics and the methods they employ to deliver product to customers. The results of the Company's operating segments are reviewed by the Company’s chief operating decision maker responsible for reviewing operating performance and allocating resources. The Lawson segment primarily relies on its large network of sales representatives to visit the customer at the customers' ~~work~~ location ~~and provide VMI service~~ and produce sales orders for product that is then shipped to the ~~customer. Given the nature of the acquired Partsmaster business, it is included in the Lawson segment for reporting purposes.~~customer and also provides VMI services. The Bolt ~~Supply~~ segment primarily sells product to customers ~~through its branch locations. Bolt Supply had~~when the customers visit one of Bolt's 14 ~~branches in operation~~branch locations and the product is delivered to the customers at the ~~end~~point of sale. The Bolt segment total assets include the value of the ~~third quarter of 2020.~~acquired intangibles and the related amortization within its operating income.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Revenue	Revenue									Revenue

Lawson	Lawson	$	79,806	$	83,461	$	224,511	$	250,895	Lawson	$	93,330	$	81,491
Bolt Supply	Bolt Supply	10,471		11,318		28,947		31,324		Bolt Supply	10,226		9,544
Consolidated total	Consolidated total	$	90,277	$	94,779	$	253,458	$	282,219	Consolidated total	$	103,556	$	91,035

Gross profit	Gross profit									Gross profit

Lawson	Lawson	$	43,038	$	46,148	$	123,031	$	138,524	Lawson	$	50,408	$	45,120
Bolt Supply	Bolt Supply	4,187		4,426		11,428		12,016		Bolt Supply	4,152		3,801
Consolidated total	Consolidated total	$	47,225	$	50,574	$	134,459	$	150,540	Consolidated total	$	54,560	$	48,921

Operating income	Operating income									Operating income
Lawson	Lawson	$	1,112	$	5,377	$	19,003	$	11,490	Lawson	$	4,256	$	18,094
Bolt Supply	Bolt Supply	889		1,069		2,205		2,123		Bolt Supply	554		544
Consolidated total	Consolidated total	2,001		6,446		21,208		13,613		Consolidated total	4,810		18,638
Interest expense	Interest expense	(142)		(138)		(329)		(481)		Interest expense	(323)		(115)
Other income (expense), net	Other income (expense), net	615		(13)		15		798		Other income (expense), net	372		(1,111)
Income before income taxes	Income before income taxes	$	2,474	$	6,295	$	20,894	$	13,930	Income before income taxes	$	4,859	$	17,412

The government of the State of Illinois defines Lawson Products as an essential business. A change in ~~lost revenue~~this status could result in the temporary closure of our business. The COVID-19 pandemic could result in a temporary closure of any or all of our office space, distribution facilities, or Bolt branch locations, as well as disruptions to our ~~Company, limitations~~supply chain and interactions with customers. The pandemic may have a material adverse impact on ~~our ability~~future financial results, liquidity, and overall performance of the Company. It is reasonably possible that estimates made in the financial statements may be materially and adversely impacted as a result of these conditions, including delay in payment of receivables, impairment losses related to ~~source high demand products, limitations on our sales force~~goodwill and other long-lived assets, and inability to ~~perform certain functions due to state or federal stay-at-home orders, slow-down of customer demand for our products and limitations of some customers to pay us on a timely basis.~~utilize deferred tax assets.

On March 27, 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security ("CARES") Act to provide certain relief as a result of the COVID-19 outbreak. The Company has elected to defer the employer side social security payments in accordance with the CARES Act. The total amount deferred is $3.5 million, with $1.7 million expected to be paid in 2021 and the remainder in 2022. The Company will continue to evaluate how the provisions of the CARES Act will impact its financial position, results of operations and cash flows. The Company has utilized the Canadian Emergency Wage Subsidy ("CEWS") Act for both Lawson Canada and Bolt for assistance with hourly employee costs. The CEWS is a program that provides a subsidy of certain eligible wages commencing March 15, 2020 through December 31, 2020 subject to meeting certain criteria. During the second quarter of 2020 the Company recorded $0.9 million in subsidies from the CEWS program which is recognized as a reduction to selling, general and administrative expenses in the consolidated statement of income and comprehensive income. No subsidies were recognized in the three months ended September 30, 2020.

In the first quarter of 2020, the government of the state of Illinois defined essential businesses, allowing Lawson to operate during the pandemic. A change in this status could result in the temporary closure of our business. Additionally the COVID-19 pandemic could result in a temporary closure of any or all of our distribution facilities or the Bolt branch locations, which would negatively impact our operations. Other disruptions to our supply chain such as reduced capacity or temporary

shutdowns of freight carriers could also negatively impact Company performance. The pandemic is negatively impacting sales and operations currently and may negatively impact future financial results, liquidity and overall performance of the Company. Additionally, it is reasonably possible that estimates made in the financial statements may be materially and adversely impacted in the near term as a result of these conditions, including delay in payment of receivables, impairment losses related to goodwill and other long-lived assets, and inability to utilize deferred tax assets.

The Lawson MRO business model relies upon customer interaction as well as a consistent schedule of onsite visits by our sales representatives to customer locations. The Bolt business model relies on foot traffic in its branch locations. The onset of the COVID-19 pandemic, as well as social distancing guidelines and government mandated shelter in place orders, have negatively impacted the ability of our sales reps to visit our customers and for foot traffic to return to our Bolt branch locations, resulting in an overall negative impact on our business.

The second quarter 2020 financial performance of the Company was substantially negatively impacted as state and local governments throughout the United States and Canada imposed strict COVID-19 related restrictions, including shutdowns of nonessential businesses and stay-at-home orders, particularly in April. These restrictions were relaxed in May and June, and were further relaxed throughout the third quarter. The economic climate in the third quarter improved as non-essential businesses reopened in both limited capacity and full capacity. The relaxed restrictions resulted in increased customer contact and more consistent customer visits for Lawson MRO sales representatives, as well as increased customer visits to Bolt branch locations. The improved economic climate and increased activity of the Lawson MRO and Bolt segments led to a sequential improvement in financial results in the third quarter 2020 compared to the second quarter 2020.

The Company has taken several steps to mitigate the potential negative impacts of COVID-19. The actions taken included, but are not limited to, furloughing employees, reducing base salaries for a period of time, canceling travel and award trips, temporarily consolidating its Suwanee distribution center operations into the McCook facility, eliminating non-critical capital expenditures and eliminating various positions throughout the Company. In the third quarter the Company brought back approximately 70% of the previously furloughed employees. The Company reopened the Suwanee distribution center in a reduced capacity in the third quarter as overall business activity increased.

The Company continues to monitor its balance sheet and liquidity position and is taking actions to protect cash flows from operations, while at the same time managing its operating expenses in relation to current sales trends. At September 30, 2020, the Company had $17.2 million of unrestricted cash and cash equivalents and an additional $66.0 million of borrowing capacity, net of outstanding letters of credit, under its committed credit facility. The Company recorded a liability of $32.5 million in relation to the acquisition of Partsmaster.

In ~~September~~August 2020, we acquired Partsmaster, a leading Maintenance, Repair and Operations ("MRO") distributor from NCH ~~Corporation. Partsmaster has over~~Corporation, with approximately 200 sales representatives and ~~serves~~ approximately 16,000 customers throughout the United States and Canada. We also assumed the lease on the Partsmaster distribution center located in Greenville, Texas, and we will continue to fulfill orders from this facility as we integrate Partsmaster into our MRO segment operations.

The purchase price of the acquisition was $35.3 million in cash and the assumption of certain liabilities. We paid $2.3 million at the time of the acquisition and we will pay the remaining $33.0 million in May 2021. We plan to pay the remaining portion of the purchase price with cash ~~on hand~~ and ~~as necessary, any remaining portion using~~ our existing credit facility. ~~The liabilities assumed include approximately $2.9 million relating to deferred employee compensation and $4.1~~Partsmaster contributed $15.7 million of ~~accounts payable~~revenue and ~~other accrued liabilities.~~

~~Assets acquired and liabilities assumed as a result of the acquisition were accounted for at their fair value on the acquisition date. The identified assets include $5.0~~$0.7 million of ~~intangible assets for customer relationships and $2.8 million for trade names with estimated useful lives~~operating income in the first quarter of 10 years and 5 years, respectively. Goodwill of $16.0 million related to this acquisition reflects the purchase price less the fair market value of the identifiable assets. The appropriate fair values of the assets acquired and liabilities assumed are based on preliminary estimates and assumptions. These preliminary estimates and assumptions could change significantly during the purchase price measurement period as we finalize the valuations of the assets acquired and liabilities assumed.2021.

~~In March 2020,~~There is substantial uncertainty as to the World Health Organization declared a new strain of coronavirus (“COVID-19”) a pandemic. The COVID-19 pandemic continues to negatively impact the global economy by disrupting global supply chains and financial markets and has negatively impacted our operational and financial performance, including the ability of our sales representatives to call on customers in person and perform VMI services at customer locations. ~~The Bolt Supply House saw a decline in sales in the second quarter and third quarter as the ability of customers to visit branch locations was restricted and certain customers temporarily closed.~~ ~~The continued impact of~~effect the COVID-19 pandemic will have on ~~our operational~~the future results of the Company. Various events related to COVID-19 may impact revenue, product sourcing, sales functions, and ~~financial performance, including our~~customers' ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, including the duration and spread of the pandemic and related restrictions on travel and transports, all of which remain uncertain. An extended period of global supply chain and economic disruption could materially affect our business, sales, results of operations and financial condition.pay timely.

The government of the State of Illinois defines Lawson ~~continues to be defined~~Products as an essential ~~business by the state of Illinois.~~business. A change in this status could result in the temporary closure of our business. ~~Additionally the~~The COVID-19 pandemic could result in a temporary closure of ~~some~~any or all of our office space, distribution facilities, or ~~the~~ Bolt branch locations, ~~which would negatively impact our operations. Other~~as well as disruptions to our supply chain ~~such as reduced capacity or temporary shutdowns of freight carriers could also negatively impact our performance.~~

and interactions with customers. The pandemic ~~has negatively impacted our current operations and~~ may ~~negatively~~have a material adverse impact ~~our~~on future financial results, liquidity, and overall ~~performance. Additionally, it~~performance of the Company. It is reasonably possible that estimates made in ~~support of our~~the financial statements may be materially and adversely impacted ~~in the near term~~ as a result of these conditions, including delay in payment of receivables, impairment losses related to goodwill and other long-lived assets, and inability to utilize deferred tax assets.

The onset of the COVID-19 pandemic occurred in March 2020. This resulted in widespread closures of businesses, decreased travel and other substantial restrictions on economic ~~climate~~activity beginning in the ~~third quarter has improved as many nonessential businesses have reopened~~first quarter. The most severe restrictions were effective in both limited capacity and full capacity. The relaxed restrictions have resulted in increased customer contact and more consistent customer visits for Lawson MRO sales representatives and customers were also allowed in Bolt branch locations. The improved economic climate and increased activity of the Lawson MRO and Bolt segments led to a sequential improvement in financial results in the third quarter of 2020 compared to the second quarter of ~~2020. However,~~2020, particularly the month of April. These restrictions ~~related~~began to be relaxed subsequent to April 2020, which led to an improved business climate and increased economic activity throughout the ~~COVID-19 pandemic and a downturn~~remainder of the year. The relaxed restrictions continued in the ~~oil and gas industry has~~first quarter of 2021, which led to ~~lower sales~~increased business activity and contributed to improved operating ~~income~~results compared to the ~~third~~first quarter of ~~2019.~~

We continue to take action to mitigate the potential negative impacts of COVID-19. The actions taken included, but are not limited to, furloughing employees, reducing base salaries for a period of time and incentive awards, canceling travel and award trips, temporarily consolidating our Suwanee distribution center operations into the McCook facility eliminating non-critical capital expenditures and eliminating various positions throughout the Company. In the third quarter we brought back approximately 70% of the previously furloughed employees and reopened our Suwanee distribution center in a reduced capacity as overall business activity increased.

We continue to monitor our balance sheet and liquidity position and take actions to protect our cash flows from operations while at the same time managing our operating expenses in relation to current sales trends. At September 30, 2020, we had $17.2 million of unrestricted cash and cash equivalents and an additional $66.0 million of borrowing capacity, net of outstanding letters of credit. Our outstanding letters of credit include a letter of credit for $33.0 million for the remaining payment of the Partsmaster acquisition.2020.

We will continue to closely monitor the overall economic and operating environment and we will take appropriate actions to protect the safety of our employees, customers and ~~suppliers while continuing to meet our working capital needs and remain in compliance with our debt covenants.~~suppliers. While COVID-19 ~~has~~continues to negatively ~~impacted~~impact our sales, cost control measures and ability to effectively service our customers, we have continued to generate positive cash flow that has enabled us to maintain a strong financial position. We plan to continue to respond to pandemic developments in a prompt and disciplined manner with an emphasis on maintaining our strong financial position.

The MRO distribution industry is highly fragmented. We compete for business with several national distributors as well as a large number of regional and local distributors. The MRO business is significantly impacted by the overall strength of the manufacturing sector of the U.S. economy which has been significantly affected by the COVID-19 pandemic. One measure used to evaluate the strength of the industrial products market is the PMI index published by the Institute for Supply Management, which is considered by many economists to be a reliable near-term economic barometer of the manufacturing sector. A measure above 50 generally indicates expansion of the manufacturing sector while a measure below 50 generally

represents contraction. The average monthly PMI was ~~55.2~~61.4 in the ~~third~~first quarter of ~~2020~~2021 compared to ~~49.4~~50.0 in the ~~third~~first quarter of 2019. The third quarter 2020 PMI of 55.2 follows a second quarter PMI of 45.7 and a first quarter PMI of 50.0. This high degree of volatility in 2020, primarily reflecting the effect of the COVID-19 pandemic on the current economic environment, makes this indicator more difficult to interpret in measuring year over year economic growth.2020.

Our sales are also affected by the number of sales representatives and their productivity. ~~The acquisition of Partsmaster in September increased our sales force by approximately 200 sales representatives in September 2020 and contributed a weighted average of 67 sales representatives to the sales force head count in the third quarter 2020.~~ Including the Partsmaster sales representatives, the average sales rep headcount for the quarter was ~~993~~1,083 sales representatives in the ~~third~~first quarter of ~~2020~~2021 compared to ~~989~~998 sales representatives during the ~~thir~~dfirst quarter of ~~2019.~~

2020. Lawson segment sales representative productivity, measured as sales per rep per day and including the Partsmaster sales reps, ~~decreased 4.6%~~increased 7.3% to ~~$1,249~~$1,360 in the ~~third~~first quarter of ~~2020~~2021 from ~~$1,309~~$1,268 in the ~~third~~first quarter of ~~2019.~~2020. Partsmaster contributed ~~$5.4~~$15.7 million in sales in the ~~third~~first quarter. ~~The decrease in~~Excluding the impact of Partsmaster, sales rep productivity measured as average sales per rep per day increased 7.6% compared to t~~he third quarter of 2019 was primarily driven by~~ the ~~negative impacts of COVID-19 and the downturn in the oil and gas industry.~~year ago quarter. We ~~anticipate the size of our sales force to increase slightly for the remainder of 2020, however, the size of our sales force will be influenced by the performance of the overall economy. We also~~ plan to continue to concentrate our efforts on increasing the productivity of our ~~existing and acquired~~ sales representatives.

We believe that certain non-GAAP financial measures may provide users of this financial information with additional meaningful comparisons between current results and results in prior operating periods. We believe that these non-GAAP financial measures can provide additional meaningful reflection of underlying trends of the business because they provide a comparison of historical information that excludes certain infrequently occurring, seasonal or non-operational items that impact the overall comparability. These non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP.

Operating income was ~~$2.0~~$4.8 million for the ~~third~~first quarter of ~~2020~~2021 compared to ~~$6.4~~$18.6 million for the ~~third~~first quarter of ~~2019.~~2020. Excluding stock-based compensation, severance expense, acquisition costs and ~~acquisition~~other non-recurring costs, adjusted non-GAAP operating income was ~~$7.7~~$7.2 million in the ~~third~~first quarter of ~~2020~~2021 compared to ~~$8.9~~$7.9 million in the ~~third~~first quarter of ~~2019, driven by decreased sales~~2020. The decrease in adjusted non-GAAP operating income was primarily due to lower organic sales from the ~~COVID-19 pandemic,~~pre-pandemic levels, partially offset by inclusion of Partsmaster adjusted non-GAAP operating income of ~~$0.4~~$1.3 million induring the ~~third quarter of 2020. Operating income was $21.2 million for the first nine~~three months of 2020 compared to $13.6 million for the first nine months of 2019. Excluding stock-based compensation, severance expense and acquisition costs, adjusted non-GAAP operating income was $20.5 million in the first nine months of 2020 compared to $22.8 million in the first nine months of 2019.ended March 31, 2021.


Reconciliation of GAAP Operating Income to Adjusted Non-GAAP Operating Income (Unaudited)	Reconciliation of GAAP Operating Income to Adjusted Non-GAAP Operating Income (Unaudited)									Reconciliation of GAAP Operating Income to Adjusted Non-GAAP Operating Income (Unaudited)
		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(Dollars in Thousands)	(Dollars in Thousands)	2020		2019		2020		2019		(Dollars in Thousands)	2021		2020

Operating income as reported by GAAP	Operating income as reported by GAAP	$	2,001	$	6,446	$	21,208	$	13,613	Operating income as reported by GAAP	$	4,810	$	18,638
Stock based compensation (1)	Stock based compensation (1)	4,746		2,374		(2,767)		7,621		Stock based compensation (1)	1,000		(10,700)
Severance expense		488		30		1,520		1,542
Acquisition costs		473		—		555		—
Inventory reserves (2)										Inventory reserves (2)	825		—
Severance expense and employee acquisition costs										Severance expense and employee acquisition costs	576		7
Adjusted non-GAAP operating income	Adjusted non-GAAP operating income	$	7,708	$	8,850	$	20,516	$	22,776	Adjusted non-GAAP operating income	$	7,211	$	7,945


		2020				2019					2021				2020
(Dollars in thousands)	(Dollars in thousands)	Amount		% of Net Sales		Amount		% of Net Sales		(Dollars in thousands)	Amount		% of Net Sales		Amount		% of Net Sales

Revenue	Revenue	$	90,277	100.0	%	$	94,779	100.0	%	Revenue	$	103,556	100.0	%	$	91,035	100.0	%
Cost of goods sold	Cost of goods sold	43,052		47.7	%	44,205		46.6	%	Cost of goods sold	48,996		47.3	%	42,114		46.3	%
Gross profit	Gross profit	47,225		52.3	%	50,574		53.4	%	Gross profit	54,560		52.7	%	48,921		53.7	%

Operating expenses:	Operating expenses:									Operating expenses:
Selling expenses	Selling expenses	19,155		21.2	%	21,255		22.4	%	Selling expenses	23,802		23.0	%	19,984		22.0	%
General and administrative expenses	General and administrative expenses	26,069		28.9	%	22,873		24.2	%	General and administrative expenses	25,948		25.0	%	10,299		11.3	%
Total operating expenses	Total operating expenses	45,224		50.1	%	44,128		46.6	%	Total operating expenses	49,750		48.0	%	30,283		33.3	%

Operating income	Operating income	2,001		2.2	%	6,446		6.8	%	Operating income	4,810		4.6	%	18,638		20.5	%

Interest expense	Interest expense	(142)		(0.2)	%	(138)		(0.1)	%	Interest expense	(323)		(0.3)	%	(115)		(0.1)	%
Other income (expenses), net	Other income (expenses), net	615		0.7	%	(13)		(0.1)	%	Other income (expenses), net	372		0.4	%	(1,111)		(1.3)	%

Income before income taxes	Income before income taxes	2,474		2.7	%	6,295		6.6	%	Income before income taxes	4,859		4.7	%	17,412		19.1	%

Income tax expense	Income tax expense	736		0.8	%	1,521		1.6	%	Income tax expense	1,263		1.2	%	4,879		5.3	%

Net income	Net income	$	1,738	1.9	%	$	4,774	5.0	%	Net income	$	3,596	3.5	%	$	12,533	13.8	%


	Three Months Ended March 31,						Increase
(Dollars in thousands)	2021			2020			Amount		%

Revenue
Lawson	$	93,330		$	81,491		$	11,839	14.5%
Bolt Supply	10,226			9,544			682		7.1%
Consolidated	$	103,556		$	91,035		$	12,521	13.8%

Gross profit
Lawson	$	50,408		$	45,120		$	5,288	11.7%
Bolt Supply	4,152			3,801			351		9.2%
Consolidated	$	54,560		$	48,921		$	5,639	11.5%

Gross profit margin
Lawson	54.0		%	55.4		%
Bolt Supply	40.6		%	39.8		%
Consolidated	52.7		%	53.7		%

Total sales increased 13.8% to $103.6 million in the first quarter of 2021 compared to $91.0 million in the first quarter of 2020. Sales benefited from the inclusion of $15.7 million of sales from Partsmaster in the first quarter of 2021, offset by a decrease in organic Lawson sales compared to the prior year due to the impact of the COVID-19 pandemic. Sales productivity, measured as sales per rep per day, increased 7.3% in the first quarter of 2021 compared to the same quarter of 2020. Bolt Supply sales also improved by 7.1% compared to the prior year quarter. Average daily sales increased 15.6% to $1.644 million in the first quarter of 2021 compared to $1.422 million in the prior year quarter. Partsmaster contributed $0.250 million of average daily sales in the first quarter 2021. The first quarter of 2021 had 63 selling days compared to 64 selling days in the first quarter of 2020. Excluding the impact of foreign currency, average daily sales increased 14.6% in the first quarter of 2021.

Three Months Ended
September 30, Increase/(Decrease)
(Dollars in thousands) 2020 2019 Amount %
Revenue
Lawson $ 79,806 $ 83,461 $ (3,655) (4.4)%
Bolt Supply 10,471 11,318 (847) (7.5)%
Consolidated $ 90,277 $ 94,779 $ (4,502) (4.7)%
Gross profit
Lawson $ 43,038 $ 46,148 $ (3,110) (6.7)%
Bolt Supply 4,187 4,426 (239) (5.4)%
Consolidated $ 47,225 $ 50,574 $ (3,349) (6.6)%
Gross profit margin
Lawson 53.9 % 55.3 %
Bolt Supply 40.0 % 39.1 %
Consolidated 52.3 % 53.4 %

Total sales decreased 4.7% to $90.3 million in the third quarter of 2020 compared to $94.8 million in the third quarter of 2019. Sales were negatively impacted by the effect of the COVID-19 pandemic and a downturn in the oil and gas industry, partially offset by the contribution of $5.4 million of sales from Partsmaster in the third quarter 2020. Sales productivity, measured as sales per rep p~~er day,~~ ~~decreased 4.6% in the~~ ~~third quarter of 2020 compared to the same quarter of 2019, primarily driven by the COVID-19 pandemic.~~ Bolt Supply sales were also negatively impacted by COVID-19 compared to the prior year quarter. Consolidated average daily sales increased on a sequential basis throughout the third quarter, from $1.294 million in July to $1.315 million in August and $1.629 million in September as the economy continued to improve. Partsmaster contributed $0.257 million in average daily sales in September. Average daily sales declined 4.7% to $1.411 million in the third quarter of 2020 compared to $1.481 million in the prior year quarter. Partsmaster contributed $0.085 million of average daily sales in the third quarter 2020. Both the third quarter of 2020 and 2019 had 64 selling days.

~~Reported~~Driven by increased sales, reported gross profit ~~decreased $3.3~~increased $5.6 million to ~~$47.2~~$54.6 million in the ~~third~~first quarter of ~~2020~~2021 compared to ~~$50.6~~$48.9 million ~~as a result of the sales decline.~~driven by increased sales. Partsmaster contributed ~~$3.6~~$10.1 million to reported gross profit in the ~~third~~first quarter of ~~2020~~2021 before giving effect to service costs. C~~onsolidated~~Consolidated gross profit as a percent of sales was ~~52.3%~~52.7% in the ~~third~~first quarter of ~~2020~~2021 compared to ~~53.4%~~53.7% in the prior year quarter.~~Gross profit as a percentage of sales generated by sales representative acquired from Partsmaster was 66.8% before giving affect to service related costs.~~ The organic Lawson MRO segment gross margin as a percent of sales declined to ~~58.8%~~58.2% in the ~~third~~first quarter of ~~2020~~2021 compared to ~~60.9%~~60.8% a year ago quarter before giving effect to the service-related costs, primarily as a result of ~~de-leveraging of fixed distribution costs over a lower sales base,~~ a shift to lower margin products in the quarter ~~and~~compared to the prior year quarter, higher net transportation ~~costs.~~costs and additional inventory reserves related to the rationalization of inventory related to the Partsmaster acquisition and a shift in selling prices below cost on personal protective equipment inventory.


		Three Months Ended September 30,				Increase (Decrease)				Three Months Ended March 31,				Increase
(Dollars in thousands)	(Dollars in thousands)	2020		2019		Amount		%	(Dollars in thousands)	2021		2020		Amount		%

Selling expenses	Selling expenses								Selling expenses
Lawson	Lawson	$	18,373	$	20,402	$	(2,029)	(9.9)%	Lawson	$	22,891	$	19,187	$	3,704	19.3%
Bolt Supply	Bolt Supply	782		853		(71)		(8.3)%	Bolt Supply	911		797		114		14.3%
Consolidated	Consolidated	$	19,155	$	21,255	$	(2,100)	(9.9)%	Consolidated	$	23,802	$	19,984	$	3,818	19.1%

General and administrative expenses	General and administrative expenses								General and administrative expenses
Lawson	Lawson	$	23,553	$	20,369	$	3,184	15.6%	Lawson	$	23,261	$	7,839	$	15,422	196.7%
Bolt Supply	Bolt Supply	2,516		2,504		12		0.5%	Bolt Supply	2,687		2,460		227		9.2%
Consolidated	Consolidated	$	26,069	$	22,873	$	3,196	14.0%	Consolidated	$	25,948	$	10,299	$	15,649	151.9%

Selling expenses consist of compensation and support for our sales representatives. Selling expenses ~~were $19.2~~increased to $23.8 million in the ~~third~~first quarter of ~~2020~~2021 compared to ~~$21.3~~$20.0 million in the prior year ~~quarter and, as a percent of sales, decreased to 21.2% from 22.4% in the third quarter of 2019. The decrease~~quarter. The increase in selling expense is primarily ~~related to reduced sales compensation~~ driven by the inclusion of $5.5 million in first quarter 2021 from the Partsmaster business acquisition, offset by lower commission and travel expenses. As a percent of sales, selling expenses increased to 23.0% from 22.0% in the first quarter of 2020 on a lower sales base, reinstatement of normalized selling activities not incurred during the pandemic and ~~lower travel related expenses.~~higher Partsmaster ~~contributed $1.6 million to~~ selling ~~expense in the third quarter 2020.~~expenses as a percent of sales.

General and administrative expenses consist of expenses to operate our distribution network and overhead expenses to manage the business. General and administrative expenses increased to ~~$26.1~~$25.9 million in the ~~third~~first quarter of ~~2020~~2021 from ~~$22.9~~$10.3 million in the prior year ~~quarter.~~quarter. The increased General and administrative expense was driven by an increase in stock-based compensation expense of ~~$2.4~~$11.7 million, inclusion of Partsmaster operating expenses of ~~$1.5~~$3.9 million and increased severance ~~of $0.5 million,~~ and employee acquisition costs of ~~$0.5~~$0.6 million. ~~These~~Excluding these items, ~~were partially offset by lower compensation costs.~~General and administrative expense for the first quarter of 2021 was $21.0 million flat with the year ago quarter.

2020 2019
(Dollars in thousands) Amount % of
Net Sales Amount % of
Net Sales
Revenue $ 253,458 100.0 % $ 282,219 100.0 %
Cost of goods sold 118,999 47.0 % 131,679 46.7 %
Gross profit 134,459 53.0 % 150,540 53.3 %
Operating expenses:
Selling expenses 55,445 21.9 % 64,864 23.0 %
General and administrative expenses 57,806 22.8 % 72,063 25.5 %
Total operating expenses 113,251 44.6 % 136,927 48.5 %
Operating income 21,208 8.4 % 13,613 4.8 %
Interest expense (329) (0.1) % (481) (0.2) %
Other income (expense), net 15 (0.1) % 798 0.3 %
Income before income taxes 20,894 8.2 % 13,930 4.9 %
Income tax expense 6,004 2.3 % 3,703 1.3 %
Net income $ 14,890 5.9 % $ 10,227 3.6 %

Nine Months Ended September 30, Increase/(Decrease)
(Dollars in thousands) 2020 2019 Amount %
Revenue
Lawson $ 224,511 $ 250,895 $ (26,384) (10.5)%
Bolt Supply 28,947 31,324 (2,377) (7.6)%
Consolidated $ 253,458 $ 282,219 $ (28,761) (10.2)%
Gross profit
Lawson $ 123,031 $ 138,524 $ (15,493) (11.2)%
Bolt Supply 11,428 12,016 (588) (4.9)%
Consolidated $ 134,459 $ 150,540 $ (16,081) (10.7)%
Gross profit margin
Lawson 54.8 % 55.2 %
Bolt Supply 39.5 % 38.4 %
Consolidated 53.0 % 53.3 %

Revenue for the nine months ended September 30, 2020 decreased 10.2% to $253.5 million from $282.2 million for the nine months ended September 30, 2019. All customer sales categories have been negatively impacted by the effect of the COVID-19 pandemic which began in March 2020. The decrease in sales compared to the prior year was partially offset by $5.4 million of sales from the inclusion of Partsmaster in the third quarter 2020. Average daily sales decreased 10.7% to $1.320 million in the first nine months of 2020 compared to $1.478 million in the prior year period with one more selling day in the current year to date period compared to the corresponding prior year period.

Gross profit decreased to $134.5 million in the first nine months of 2020 compared to $150.5 million in the first nine months of 2019, primarily driven by decreased sales, partially offset by lower service costs classified as cost of goods sold and the inclusion of the Partsmaster acquisition. Consolidated gross profit as a percent of sales was 53.0% compared to 53.3% a year ago. ~~The organic Lawson MRO segment gross margin as a percent of sales was 59.8% in the first nine months of 2020 compared to 60.7% a year ago.~~

Nine Months Ended September 30, Decrease
(Dollars in thousands) 2020 2019 Amount %
Selling expenses
Lawson $ 53,222 $ 62,334 $ (9,112) (14.6)%
Bolt Supply 2,223 2,530 (307) (12.1)%
Consolidated $ 55,445 $ 64,864 $ (9,419) (14.5)%
General and administrative expenses
Lawson $ 50,816 $ 64,700 $ (13,884) (21.5)%
Bolt Supply 6,990 7,363 (373) (5.1)%
Consolidated $ 57,806 $ 72,063 $ (14,257) (19.8)%

~~Selling expenses decreased to $55.4 million for the first nine months of 2020 from $64.9 million in the first nine months of 2019 and, as a percent of sales, decreased to 21.9% in th~~e first nine months of 2020 from 23.0% a year ago. The decrease in selling expense is primarily related to reduced sales compensation driven by lower sales and a reduction in travel related expenses in the third quarter. These declines were partially offset by the inclusion of $1.7 million of selling expenses from the Partsmaster acquisition.

~~General and administrative expenses decreased to $57.8 million in the first nine months of 2020 from $72.1 million in the prior year period~~ primarily due to a decrease in stock-based compensation expense of $10.4 million, a portion of which varies with the Company stock price. Lower employee compensation, travel expenses and other cost control measures put in place as a result of COVID-19 also contributed to the decline. These declines were partially offset by the inclusion of $1.5 million of general and administrative expenses from the Partsmaster acquisition.

Available cash and cash equivalents were ~~$17.2~~$26.3 million on ~~September 30, 2020~~March 31, 2021 compared to ~~$5.5~~$28.4 million on December 31, ~~2019.~~2020. Net cash ~~generated from~~used in operations for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was ~~$20.0~~$1.5 million, primarily due to lower reported operating earnings and ~~the Company managing working capital. Net cash generated from operations for the nine months ended September 30, 2019 was $8.0 million, primarily due to operating earnings offset by an increase in~~funding additional working capital ~~to support higher sales.~~needs.

~~In the third quarter of 2020, the Company paid $2.3 million in cash related to the Partsmaster acquisition.~~ Capital expenditures w~~ere $1.3~~were $0.8 million and ~~$1.4~~$0.6 million for the ~~nine~~three month ~~periods~~period ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, primarily for improvements to our distribution centers and information technology.

In 2019, our Board of Directors authorized a program in which we may repurchase up to $7.5 million of our common stock from time to time in open market transactions, privately negotiated transactions or by other methods. InWe did not repurchase any shares of stock in the first quarter of ~~2020 we purchased 47,504 shares of our common stock at an average purchase price of $36.93, under the repurchase program. No shares were repurchased~~2021 under this program in the second and third quarters. In the third quarter of 2020, we repurchased 12,077 shares of our common stock at an average price of $36.07, for the purpose of satisfying tax withholding obligations of certain employees upon the vesting of their Company issued restricted stock units.plan.

On ~~September 30, 2020,~~March 31, 2021, we had ~~$66.0~~$64.4 million of borrowing availability remaining, net of outstanding letters of credit, under our Revolving Credit ~~Agreement.~~Facility.. Our outstanding letters of credit include a $33.0 million letter of credit to secure the remaining payment for the Partsmaster acquisition. We had no outstanding borrowing under our Credit Agreement as of ~~September 30, 2020.~~March 31, 2021.

While we were in compliance with our financial covenants included in our Credit Agreement for the quarter ended ~~September 30, 2020, failure~~March 31, 2021, Failure to meet the covenant requirements of the Credit Agreement in future quarters could lead to higher financing costs, increased restrictions, or reduce or eliminate our ability to borrow funds and could have a material adverse effect on our business, financial condition and results of operations.

We believe cash provided by operations and funds available under our Credit Agreement are sufficient to fund our operating requirements, strategic initiatives and capital improvements, including the potential impact of COVID-19 over the next twelve months although we cannot provide assurance that events beyond our control will not have a material adverse impact on our liquidity.

As a part of the Partsmaster acquisition, payment of $33.0 million is due to the sellers in May 2021. The payment has been guaranteed under the Purchase Agreement, which includes the issuance of a $33.0 million irrevocable standby letter of credit. Payment will be made with cash on hand ~~and, as necessary,~~with any remaining portion using our existing ~~credit facility.~~Revolving Credit Facility. The $33.0 million obligation has been discounted to present value and is recognized as a current liability of ~~$32.5~~$32.9 million in our condensed consolidated balance sheet as of ~~September 30, 2020.~~March 31, 2021.

.We believe cash provided by operations and funds available under our Credit Agreement are sufficient to fund our operating requirements, strategic initiatives and capital improvements, including the potential impact of COVID-19 over the next twelve months although we cannot provide assurance that events beyond our control will not have a material adverse impact on our liquidity.

Under the supervision and with the participation of our senior management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information relating to Lawson, including our consolidated subsidiaries, required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) includes, without limitation, controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

~~The Company is~~Changes in ~~the process of integrating Partsmaster, which was acquired from NCH Corporation on August 31, 2020, into its overall internal control~~Internal Control over financial reporting. Management elected to exclude the internal controls of Partsmaster from its assessment of the effectiveness of internal control over financial reporting for the quarter ended September 30, 2020, as permitted by the SEC's interpretive guidance. Partsmaster constituted 17% of total assets as of September 30, 2020 and 2% of revenue and less than 2% of operating income in the first nine months of 2020.Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~September 30, 2020~~March 31, 2021 that materially affected or are reasonably likely to materially ~~affect,~~offset our internal control over financial reporting. We are in the process of integrating the internal control procedures of Partsmaster into our internal control structure. Partsmaster constituted approximately 16% of total assets as of March 31, 2021 and approximately 15% of revenue and approximately 15% of operating income in the first three months of 2021.

The COVID-19 pandemic has resulted in lost revenue to our Company, limitations on our ability to source high demand product, limitations on our sales force to perform certain functions due to state or federal stay-at-home orders, a slow-down of customer demand for our products and limitations of some customers to pay us on a timely basis. The impact of the COVID-19 pandemic on our operational and financial performance includes affecting our ability to execute our business strategies and initiatives in the expected time frame. The extent of the effect will depend on future developments, including the duration and spread of the pandemic and related restrictions on travel, transports and person to person contact, all of which are uncertain and cannot be predicted at the present time. On a broader scale, the COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. An extended period of global supply chain and economic disruption could materially affect our sales, workforce, supply chains, results of operations, and our ability to access our Credit Agreement to fund operations.

In the first quarter of 2020, our business was defined by the state of Illinois as an essential businesses, allowing us to operate during the pandemic. A change in this status could result in the temporary closure of our business. Additionally the COVID-19 pandemic could result in a temporary closure of any or all of our distribution facilities or the Bolt branch locations, which would negatively impact our operations. Other disruptions to our supply chain such as reduced capacity or temporary shutdowns of freight carriers could also negatively impact Company performance.

Our sales results have been and are expected to be negatively impacted in the future by any social distancing guidelines and government mandated shelter in place orders that would prevent our sales representatives in our MRO business segment from visiting customers in person. Shelter in place orders also reduce customer visits to our Bolt branch locations. The reduction of operations and temporary shut down by many of our customers in response to COVID-19 has also negatively impacted sales

and our ability to collect on existing credit balances, and we expect to be impacted by those reductions and shut downs in the future. Further, vendors who are negatively impacted by COVID-19 may temporarily shut down operations or have difficulty obtaining inventory, which could negatively impact our ability to fulfill customer orders.

Certain items on our balance sheet require judgments on their valuation, including intangible assets and goodwill. These valuations are based on assumptions that take future financial performance into account. COVID-19 may have a detrimental impact to our future financial performance that would require us to revise assumptions about future financial performance and impair the value of these assets. Although the Company believes that its projected future operating results and cash flows and related estimates regarding the values were based on reasonable assumptions, it is reasonably possible that estimates made may be materially and adversely impacted in the near term as a result of the COVID-19 pandemic, including impairment losses related to goodwill.

(a) (b) (c) (d)
Period Total Number of Shares
Purchased (1) Average Price
Paid per Share Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Maximum Number (or
Approximate Dollar
Value) of Shares that
May Yet Be Purchased
Under the Plans or
Programs (2)
July 1 to July 31, 2020 357 $ 31.25 — $ 4,512,000
August 1 to August 31, 2020 11,720 36.22 — 4,512,000
September 1 to September 30, 2020 — — — 4,512,000
Total 12,077 —


	(a)	(b)		(c)	(d)
Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (2)
January 1 to January 31, 2021	—	$	—	—	$	4,512,000
February 1 to February 28, 2021	268	49.59		—	4,512,000
March 1 to March 31, 2021	—	—		—	4,512,000
Total	268			—

(2) In 2019, the Company's Board of Directors authorized a program in which up to $7.5 million of the Company's common stock may be repurchased from time to time in open market transactions, privately negotiated transactions or by other methods. No shares were repurchased in the open market during the ~~third~~first quarter of 2021 under this program.


Exhibit #
31.1			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32			Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
101			The following financial statements from the Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2020,~~March 31, 2021, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statement of Income and Comprehensive Income, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements.
104			The cover page from the Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2020,~~March 31, 2021, formatted in Inline XBRL
101.INS			XBRL Instance Document
101.SCH			XBRL Taxonomy Extension Schema Document
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document
101.LAB			XBRL Taxonomy Extension Label Linkbase Document
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document


		LAWSON PRODUCTS, INC.
		(Registrant)

Dated:	~~October~~April 29, ~~2020~~2021	/s/ Michael G. DeCata
		Michael G. DeCata President and Chief Executive Officer (principal executive officer)


Dated:	~~October~~April 29, ~~2020~~2021	/s/ Ronald J. Knutson
		Ronald J. Knutson Executive Vice President, Chief Financial Officer, Treasurer and Controller (principal financial and accounting officer)


Large accelerated filer	¨	Accelerated filer	☒
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	☒
		Emerging growth company	☐


		Page #
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	4

	Condensed Consolidated Balance Sheets as of ~~September~~Mar 3ch 31, 2021 ~~0, 2020~~ (Unaudited) and December 31, ~~2019~~2020	4

	Condensed Consolidated Statements of Income and Comprehensive Income for the Three ~~and~~ ~~Nine~~Months Ended ~~September~~March 31, 2021 30and 20 ~~, 2020 and 2019~~20 (Unaudited)	5

	Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three ~~and~~ ~~Nine~~ Months Ended ~~September~~March 31, 2021 30and 20 ~~, 2020 and 2019~~20 (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~T hree Months Ended ~~September~~March 31, 2021 30and 20 ~~, 2020 and 2019~~20 (Unaudited)	8

	Notes to Condensed Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	2825

Item 4.	Controls and Procedures	2825

PART II - OTHER INFORMATION

~~Item 1A.~~	~~Risk Factors~~	28

Item 2.	Unregistered Shares of Equity Securities and Use of Proceeds	2925

Item 6.	Exhibits Index	3026

	SIGNATURES	3127


			☒			Quarterly Report under Section 13 OR 15(d) of the Securities Exchange Act of 1934


			☐			Transition Report under Section 13 OR 15(d) of the Securities Exchange Act of 1934


Lease Type	Classification	Three Months Ended September 30, 2020		Three Months Ended September 30, 2019

Consolidated Operating Lease Expense (1)	Operating expenses	$	1,262	$	1,190

Consolidated Financing Lease Amortization	Operating expenses	63		$	60

Consolidated Financing Lease Interest	Interest expense	8		10

Consolidated Financing Lease Expense		71		70

Sublease Income (2)	Operating expenses	0		0
Net Lease Cost		$	1,333	$	1,260


Lease Type	Classification	Nine Months Ended September 30, 2020		Nine Months Ended September 30, 2019
Consolidated Operating Lease Expense (1)	Operating expenses	$	3,630	$	3,532

Consolidated Financing Lease Amortization	Operating expenses	165		159

Consolidated Financing Lease Interest	Interest expense	22		23

Consolidated Financing Lease Expense		187		182

Sublease Income (2)	Operating expenses	0		(160)
Net Lease Cost		$	3,817	$	3,554


	Three Months Ended September 30,						Increase/(Decrease)
(Dollars in thousands)	2020			2019			Amount		%

Revenue
Lawson	$	79,806		$	83,461		$	(3,655)	(4.4)%
Bolt Supply	10,471			11,318			(847)		(7.5)%
Consolidated	$	90,277		$	94,779		$	(4,502)	(4.7)%

Gross profit
Lawson	$	43,038		$	46,148		$	(3,110)	(6.7)%
Bolt Supply	4,187			4,426			(239)		(5.4)%
Consolidated	$	47,225		$	50,574		$	(3,349)	(6.6)%

Gross profit margin
Lawson	53.9		%	55.3		%
Bolt Supply	40.0		%	39.1		%
Consolidated	52.3		%	53.4		%


	Nine Months Ended September 30,				Decrease
(Dollars in thousands)	2020		2019		Amount		%

Selling expenses
Lawson	$	53,222	$	62,334	$	(9,112)	(14.6)%
Bolt Supply	2,223		2,530		(307)		(12.1)%
Consolidated	$	55,445	$	64,864	$	(9,419)	(14.5)%

General and administrative expenses
Lawson	$	50,816	$	64,700	$	(13,884)	(21.5)%
Bolt Supply	6,990		7,363		(373)		(5.1)%
Consolidated	$	57,806	$	72,063	$	(14,257)	(19.8)%