Chicago, IL - Lawson Products, Inc., a distributor of products and services to the MRO marketplace, today announced results for the third quarter ended September 30, 2012. As previously announced, on October 1, 2012, Michael G. DeCata became the Company’s new president and chief executive officer.
Financial Highlights
- Operating income of $0.1 million prior to severance – an improvement of $2.8 million over the prior year
- Earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $0.6 million. Excluding severance, adjusted EBITDA of $2.0 million – an improvement of $3.6 million over the prior year
- Ongoing implementation of the Company’s previously announced $20.0 million of annualized savings resulting from restructuring initiatives
- Sales per representative per day productivity improvement of 17.9% from a year ago
Third Quarter Results
Net sales for the third quarter of 2012 were $72.0 million versus $75.4 million for the third quarter of 2011. The decrease was mainly driven by an increase in the number of vacant sales territories from a year ago, one less selling day in the third quarter of 2012 compared to 2011, and lower freight revenues. Average daily sales declined 1.6% to $1.143 million in the third quarter of 2012 from $1.162 million in the second quarter of 2012 and from $1.178 million a year ago. Although the number of vacant sales territories is up from a year ago, they remained fairly constant during the third quarter. Sales force productivity improved by 17.9% from a year ago and 2.6% from the second quarter.
Gross profit for the third quarter of 2012 was $43.4 million versus $42.5 million a year ago with the gross margin percentage increasing to 60.2% for the third quarter of 2012 from 56.5% for the year-ago quarter. This increase in gross margin was primarily due to an improved focus on controlling net customer pricing and other product-related costs, as well as managing the liquidation of discontinued products better than anticipated. This was partially offset by an increase in sales to national account customers, which carry a lower margin percentage.
Selling, general and administrative expenses (“SG&A”) decreased by $2.0 million for the third quarter of 2012 to $43.3 million from $45.3 million for the prior year period. This decline was a result of the previously announced cost savings initiatives along with lower selling and ERP-related expenses. These cost savings were partially offset by increased depreciation and facilities costs.
Excluding $1.4 million of severance expense, primarily related to the retirement of the Company’s former president and CEO, operating income was $0.1 million for the third quarter of 2012. Including severance expense, the operating loss for the third quarter of 2012 was $1.4 million compared to an operating loss of $3.1 million for the prior year period.
Net loss for the third quarter of 2012 was $1.3 million, or $0.15 per diluted share, compared to a net loss $2.2 million, or $0.25 per diluted share, in the prior year period. Excluding severance expense of $1.4 million, net income for the quarter was $0.1 million, or $0.01 per diluted share.
Corporate Highlights
- Leadership – Michael G. DeCata joined Lawson as president and CEO on October 1, 2012. Mr. DeCata brings significant experience in MRO distribution. He previously served as president of Chef’s Warehouse, a $300 million specialty food distributor and has also held senior positions at United Rentals, WW Grainger and General Electric.
- Sales Force Transformation – The Company is on target to transition its independent agents located in the United States to employees during the first quarter of 2013. Management expects minimal disruption while sales representatives continue to serve their customers.
- Distribution Network Consolidation – Lawson completed the integration of the first of three Illinois facilities into its new state-of-the-art facility in McCook, Illinois. The Company expects to integrate the other two facilities over the next two quarters. The new facility will become the hub of Lawson’s distribution network and will help to improve the Company’s operating efficiency.
- Website Launch – During the third quarter, Lawson completed the development and testing of its redesigned website. It will be launched beginning in the fourth quarter in phases that will continue into early 2013. The new website will be fully integrated with the Company’s ERP system.
Mr. DeCata commented, “Third quarter results show an improvement from where the Company was just a quarter ago. In the coming quarters, we will renew our emphasis on improving sales by building upon productivity enhancements, utilizing our new ERP system as our foundation for growth and restoring our sales force to a more effective level.”
About Lawson Products, Inc.
Founded in 1952, Lawson Products, Inc. (NASDAQ: LAWS) is an industrial distributor of more than 375,000 different maintenance and repair supplies. Lawson Products serves its customers through a dedicated team of sales representatives and employees. The Company services the industrial, institutional, commercial and government markets in all 50 U.S. states, Canada and Puerto Rico. You can learn more about the Company on its Website at www.lawsonproducts.com.
This Release 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 or contribute to such differences or that might otherwise impact the business and include the risk factors set forth in Item 1A of the December 31, 2011, Form 10-K filed on March 1, 2012 and the September 30, 2012 Form 10-Q filed on October 25, 2012. The Company undertakes no obligation to update any such factor or to publicly announce the results of any revisions to any forward-looking statements whether as a result of new information, future events or otherwise.
-TABLES FOLLOW-
LAWSON PRODUCTS, INC. | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||||||||||||||||
(Amounts in thousands, except per share data) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2012 |
| 2011 | 2012 |
| 2011 | |||||||||||
| ||||||||||||||||
Net sales | $ | 71,984 | $ | 75,366 | $ | 222,294 | $ | 242,099 | ||||||||
Cost of goods sold |
| 28,624 |
|
| 32,820 |
|
| 100,784 |
|
| 101,315 |
| ||||
Gross profit | 43,360 | 42,546 | 121,510 | 140,784 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative expenses | 43,311 | 45,335 | 132,777 | 137,026 | ||||||||||||
Severance | 1,410 | 282 | 8,180 | 1,492 | ||||||||||||
Gain on sale of assets | (11 | ) | - | (2,133 | ) | - | ||||||||||
Goodwill impairment |
| - |
|
| - |
|
| 28,306 |
|
| - |
| ||||
44,710 | 45,617 | 167,130 | 138,518 | |||||||||||||
Operating income (loss) | (1,350 | ) | (3,071 | ) | (45,620 | ) | 2,266 | |||||||||
| ||||||||||||||||
Other expense, net |
| (206 | ) |
| (20 | ) |
| (526 | ) |
| (524 | ) | ||||
| ||||||||||||||||
Income (loss) from continuing operations before income taxes | (1,556 | ) | (3,091 | ) | (46,146 | ) | 1,742 | |||||||||
| ||||||||||||||||
Income tax (benefit) expense |
| (240 | ) |
| (937 | ) |
| 18,095 |
|
| 758 |
| ||||
| ||||||||||||||||
Income (loss) from continuing operations | (1,316 | ) | (2,154 | ) | (64,241 | ) | 984 | |||||||||
| ||||||||||||||||
Discontinued operations, net of income tax |
| (2 | ) |
| (9 | ) |
| (32 | ) |
| (61 | ) | ||||
| ||||||||||||||||
Net income (loss) | $ | (1,318 | ) | $ | (2,163 | ) | $ | (64,273 | ) | $ | 923 |
| ||||
| ||||||||||||||||
Basic income (loss) per share of common stock: | ||||||||||||||||
Continuing operations | $ | (0.15 | ) | $ | (0.25 | ) | $ | (7.49 | ) | $ | 0.12 | |||||
Discontinued operations |
| - |
|
| - |
|
| - |
|
| (0.01 | ) | ||||
Net income (loss) per share | $ | (0.15 | ) | $ | (0.25 | ) | $ | (7.49 | ) | $ | 0.11 |
| ||||
| ||||||||||||||||
Diluted income (loss) per share of common stock: | ||||||||||||||||
Continuing operations | $ | (0.15 | ) | $ | (0.25 | ) | $ | (7.49 | ) | $ | 0.11 | |||||
Discontinued operations |
| - |
|
| - |
|
| - |
|
| - |
| ||||
Net income (loss) per share | $ | (0.15 | ) | $ | (0.25 | ) | $ | (7.49 | ) | $ | 0.11 |
| ||||
| ||||||||||||||||
Basic weighted average shares outstanding | 8,597 | 8,566 | 8,581 | 8,549 | ||||||||||||
Dilutive effect of stock based compensation |
| - |
|
| - |
|
| - |
|
| 62 |
| ||||
Diluted weighted average shares outstanding |
| 8,597 |
|
| 8,566 |
|
| 8,581 |
|
| 8,611 |
| ||||
| ||||||||||||||||
Cash dividends declared per share of common stock | $ | - |
| $ | 0.12 |
| $ | 0.24 |
| $ | 0.36 |
| ||||
| ||||||||||||||||
Net comprehensive loss | $ | (976 | ) | $ | (3,812 | ) | $ | (63,742 | ) | $ | (318 | ) | ||||
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