Chicago, IL - Lawson Products, Inc., a distributor of products and services to the MRO marketplace, announced results for the fourth quarter ended December 31, 2012.
- Operating income of $2.5 million versus an operating loss of $7.8 million for the prior year period and an operating loss of $1.4 million in the third quarter of 2012. Excluding non-recurring items, adjusted operating income improved $6.0 million from the prior year period
- Q4 diluted EPS of $0.20 compared to a loss of $0.65 per share in 2011
- Earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $4.3 million compared to a loss of $6.0 million last year
- Sales productivity improvement of 6.8% from a year ago as measured by average sales per representative per day
“In the fourth quarter, we continued to realize benefits from our ongoing initiatives to enhance efficiencies and lower costs which led to an improvement in our operating performance on a year-over-year basis as well as from the third quarter. While there is still more to do, we have made significant progress consolidating our distribution network, relaunching our website and transitioning our sales force to employees,” commented Michael DeCata, president and chief executive officer.
Fourth Quarter Results
Net sales for the fourth quarter of 2012 were $68.2 million versus $72.9 million for the fourth quarter of 2011. The decrease was mainly driven by reduced territorial sales coverage due to a 14% decline in the average number of sales representatives in the fourth quarter of 2012 compared to the prior year period. Average daily sales declined 2.2% to $1.118 million in the fourth quarter of 2012 from $1.143 million in the third quarter of 2012 due to softer sales realized during the holiday weeks. Sales force productivity improved by 6.8% from a year ago.
Gross profit for the fourth quarter of 2012 was $39.7 million versus $39.0 million a year ago with the gross margin percentage increasing to 58.2% for the fourth quarter of 2012 from 53.5% for the year-ago quarter. This increase in gross margin was due primarily to lower warehousing costs and higher freight recoveries. Results also benefited from managing the liquidation of discontinued product better than anticipated.
Selling, general and administrative expenses (“SG&A”) decreased by $5.3 million for the fourth quarter of 2012 to $38.9 million or 57.1% of sales compared to $44.3 million or 60.8% of sales for the prior year period. This decline was a result of lower commissions on reduced sales, the previously announced cost savings initiatives, and lower selling and ERP-related expenses. These savings were partially offset by increased depreciation and facility expenses versus the prior year period.
Operating income for the fourth quarter of 2012 was $2.5 million compared to an operating loss of $7.8 million for the prior year period. Excluding severance adjustments of $0.2 million and a $1.6 million gain on sale of property, adjusted operating income was $0.7 million for the fourth quarter of 2012 compared to an adjusted operating loss of $5.3 million in the prior year period and break-even in the third quarter of 2012.
Net income for the fourth quarter of 2012 was $1.7 million, or $0.20 per diluted share, compared to a net loss $5.5 million, or $0.65 per diluted share, in the prior year period.
- Lawson launched its new e-commerce website. The website enables new and existing customers to perform product searches easily, obtain pricing and place direct orders via the Internet. The website has been designed to improve cross-selling and up-selling activity, as well as enhance Lawson's visibility to customers when its sales team is not on-site with the customer.
- The Company completed its transition from an independent agent model to an employee sales team in the United States and increased its emphasis on productivity per sales representative. Lawson entered 2013 with approximately 760 sales representatives. During 2013, Lawson intends to increase the size of its sales team in order to expand the number of sales territories covered and improve the penetration of sales in its existing territories.
- During the first half of 2013, the Company intends to complete the transition of the operations currently performed at its Addison, Illinois, distribution center to its new packaging and distribution center in McCook, Illinois. As the McCook facility becomes fully operational, the Company believes it will begin to realize further efficiencies in its operations, enhance customer service through reductions in order delivery times, increase order fulfillment rates and provide a foundation to improve inventory productivity.
“In 2013, we will focus on growing sales as we look to develop under-served territories and increase the productivity of our sales force. We have added many tools to enhance the customer experience and help our sales team become more productive. In an effort to solidify these initiatives and jump-start our efforts, for the first time in six years, we will host a national sales meeting in St. Louis next week. I am pleased with the progress I have seen in the short time I have been at Lawson and I believe that we are positioning ourselves for sustainable growth,” concluded Mr. DeCata.