Lawson Products Reports Third Quarter 2013 Results
The following excerpt is from the company's SEC filing
CHICAGO, October 24, 2013 - Lawson Products, Inc. (NASDAQ:LAWS) (“Lawson” or the "Company"), a distributor of products and services to the MRO marketplace, today announced results for the third quarter ended September 30, 2013.
Michael DeCata, president and chief executive officer, commented, “I am pleased with our third quarter progress. This was the first quarter in nine quarters in which Lawson realized a year-over-year net sales increase. We will continue to focus our efforts on sales growth including adding to our sales force. During the quarter we added 11 sales representatives putting us on track to finish the year with more than 800 active sales reps. We are encouraged to see that these efforts have begun to drive sales improvements.”
Mr. DeCata added, “Over the past few quarters we have made good progress improving the operational side of our business. With the McCook distribution center now on-line, customer service levels have improved and significant process enhancements are underway. We are now beginning to operate more efficiently, which has led to higher customer satisfaction and lower operating costs.”
•Net sales were $68.2 million in the third quarter of 2013 compared to $67.9 million in the third quarter of last year.
•Operating income improved $2.6 million to $0.9 million in the third quarter of 2013 compared to an operating loss of $1.7 million in the prior year quarter.
•Adjusted operating income of $1.8 million for the quarter representing a $2.0 million improvement over the second quarter (see table 1).
Net sales for the third quarter of 2013 increased to $68.2 million with one additional selling day from $67.9 million in the third quarter of 2012. The Company ended the quarter with 784 sales representatives, an increase of 11 from the second quarter of 2013 and an increase of 27 from the beginning of the year. Average daily sales were flat with the second quarter and decreased slightly to $1.066 million in the third quarter of 2013 compared to $1.077 million a year ago. Average daily sales per sales representative decreased slightly, as a proportion of newly hired sales reps in the early stages of building up customer relationships in their territories has increased. During the third quarter there were 64 selling days. Due to the upcoming holiday season, there will be three fewer selling days in the fourth quarter.
Gross profit percentage for the quarter was 60.4% compared to 59.5% in the second quarter and 62.6% a year ago. The improvement over the second quarter was driven primarily by improved net freight recoveries and lower distribution costs as a result of efficiencies gained from the Company's McCook facility. The year ago quarter benefited from the sell through of previously discontinued products.
SG&A decreased to $39.4 million for the third quarter of 2013 compared to $42.8 million a year ago. The decrease was primarily driven by reductions in compensation and outside consulting services as the Company continues to focus on cost control measures.
Excluding severance, adjusted non-GAAP operating income was $1.8 million for the third quarter of 2013 (See Table 1). This represents an improvement of $2.2 million over the prior year quarter and an improvement
of $2.0 million over the second quarter of 2013. Operating income was $0.9 million for the third quarter of 2013 compared to a loss of $1.7 million in the third quarter of 2012.
Income from continuing operations for the third quarter of 2013 was $0.2 million, or $0.02 per diluted share, as compared to a loss of $1.6 million, or $0.18 per diluted share, a year ago.
•The Company furthered its focus to grow sales by redeploying savings in general and administrative costs to its sales team resulting in a severance charge of $1.0 million for the quarter.
•On October 11, 2013, the Company entered into an Asset Purchase Agreement to sell substantially all of the net assets of its wholly owned subsidiary, Automatic Screw Machine Products Company, Inc., for $12.5 million. The Company anticipates a pre-tax gain of approximately $1.5 million in the fourth quarter.
“Our Company is fundamentally sound and getting stronger. Service levels have improved significantly and we continue to make improvements that enhance our customers' experience. With an improved financial position, our organization is well positioned to focus on growing sales and making the necessary investments for future success,” concluded Mr. DeCata.
Lawson Products, Inc., will conduct a conference call with investors to discuss the third quarter 2013 results at 9:00 a.m. EDT on October 24, 2013. The conference call is available by direct dial at 877-317-6789 in the U.S. or 412-317-6789 from outside of the U.S. A replay of the conference call will be available approximately one hour after completion of the call through November 30, 2013. Callers can access the replay by dialing 877-344-7529 in the U.S. or 412-317-0088 outside the U.S. The PIN access number for the replay is 10016326#. A streaming audio of the call and an archived replay will also be available on the Investor Relations page of Lawson's website through November 30, 2013.
Founded in 1952, Lawson Products (NASDAQ: LAWS) is an industrial distributor of more than 300,000 maintenance and repair products. Lawson Products serves the industrial, commercial, institutional and government maintenance, repair and operations (MRO) market. The Company ships products to customers in all 50 states, Puerto Rico, Canada, Mexico and the Caribbean from five strategically located distribution centers in North America. Under its Kent Automotive brand, the Company supplies products to collision and mechanical repair shops as well as automotive OEMs. For additional information, please visit www.lawsonproducts.com.
(Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2013 2012 2013 2012Net sales$68,235 $67,863 $203,765 $209,057Cost of goods sold27,015 25,368 82,097 90,539Gross profit41,220 42,495 121,668 118,518 Operating expenses: Selling, general and administrative expenses39,424 42,836 123,601 131,455Severance expense962 1,410 964 8,180Gain on sale of assets(36) (11) (36) (2,133)Goodwill impairment— — — 28,306 40,350 44,235 124,529 165,808 Operating income (loss)870 (1,740) (2,861) (47,290) Interest expense(365) (229) (799) (453)Other income (expense), net(19) 23 (150) (73) Income (loss) from continuing operations before income taxes486 (1,946) (3,810) (47,816)Income tax expense (benefit)303 (389) (398) 17,453 Income (loss) from continuing operations183 (1,557) (3,412) (65,269)Discontinued operations, net of income taxes418 239 1,187 996Net income (loss)$601 $(1,318) $(2,225) $(64,273) Basic and diluted income (loss) per share of common stock: Continuing operations$0.02 $(0.18) $(0.40) $(7.61)Discontinued operations0.05 0.03 0.14 0.12Net income (loss) per share$0.07 $(0.15) $(0.26) $(7.49) Basic weighted average shares outstanding8,651 8,587 8,629 8,581Effect of dilutive securities outstanding43 — — —Diluted weighted average shares outstanding8,694 8,587 8,629 8,581
September 30, 2013 December 31, 2012ASSETS(Unaudited) Current assets: Cash and cash equivalents$418 $1,640Restricted cash800 —Accounts receivable, less allowance for doubtful accounts32,265 29,451Inventories, net44,509 44,681Miscellaneous receivables and prepaid expenses4,418 5,308Deferred income taxes17 17Discontinued operations9,938 9,232Total current assets92,365 90,329Property, plant and equipment, net62,157 66,981Cash value of life insurance8,609 14,943Deferred income taxes55 55Other assets497 449Discontinued operations395 174Total assets$164,078 $172,931 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Revolving line of credit$18,315 $16,127Accounts payable14,181 11,421Accrued expenses and other liabilities23,990 31,330Discontinued operations485 950Total current liabilities56,971 59,828Security bonus plan16,435 18,837Financing lease obligation10,416 10,786Deferred compensation5,481 5,741Deferred rent liability4,367 4,621Other liabilities1,398 2,258Discontinued operations— 127Total liabilities95,068 102,198 Stockholders’ equity: Preferred stock, $1 par value: Authorized - 500,000 shares, Issued and outstanding — None— —Common stock, $1 par value: Authorized - 35,000,000 shares; Issued - 8,660,279 and 8,614,837 shares, respectively; Outstanding - 8,650,919 and 8,605,901 shares, respectively8,660 8,615Capital in excess of par value7,655 6,951Retained earnings50,539 52,764Treasury stock – 9,360 and 8,936 shares, respectively(159) (155)Accumulated other comprehensive income2,315 2,558Total stockholders’ equity69,010 70,733Total liabilities and stockholders’ equity$164,078 $172,931
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, the Company's management believes that certain non-GAAP financial measures may provide users of this financial information additional meaningful comparisons between current results and results in prior operating periods. Management believes 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 or non-operational items that impact the overall comparability. See Table 1 below for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three months ended September 30, 2013, June 30, 2013 and September 30, 2012. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP.
TABLE 1 - RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP OPERATING INCOME (LOSS)(Amounts in thousands)(Unaudited) Three Months Ended September 30, June 30, September 30, 2013 2013 2012Operating income (loss), as reported per GAAP$870 $(201) $(1,740) Severance expense962 2 1,410 Adjusted non-GAAP operating income (loss)$1,832 $(199) $(330)
LAWSON PRODUCTS, INC.TABLE 2 - QUARTERLY RESULTS(Unaudited) (Dollars in thousands) Three Months Ended Sep. 30, 2013 Jun. 30, 2013 Mar. 31, 2013 Dec. 31, 2012 Sep. 30, 2012 Number of business days64 64 63 61 63 Average daily net sales$1,066 $1,067 $1,067 $1,057 $1,077Sequential quarter increase (decrease)(0.1)% — % 0.9% (1.9)% (1.3)% Average active sales rep. count (1)774 764 762 769 773Period end active sales rep. count784 773 760 767(2) 769 Sales per rep. per day$1.377 $1.397 $1.400 $1.375 $1.394Sequential quarter increase (decrease)(1.4)% (0.2)% 1.8% (1.4)% 3.1% Net sales$68,235 $68,317 $67,213 $64,505 $67,863Gross profit41,220 40,634 39,814 38,900 42,495 Gross profit percentage60.4% 59.5% 59.2% 60.3% 62.6% Operating expenses Selling, general & administrative expenses39,424 40,833 43,344 38,590 42,836Severance expense (benefit)962 2 — (159) 1,410Gain on sale of assets(36) — — (1,588) (11) 40,350 40,835 43,344 36,843 44,235 Operating income (loss)$870 $(201) $(3,530) $2,057 $(1,740)
(2)Following the transition of the U.S. independent agents to employee status, the Company began January 1, 2013 with 757 sales representatives
The above information was disclosed in a filing to the SEC. To see this filing in its entirety, click here. Lawson Products next reports earnings on October 24, 2013.
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