Chicago, IL - Lawson Products, Inc. announced results for the first quarter ended March 31, 2014.
Michael DeCata, president and chief executive officer, commented, “We continued to make progress this quarter as both our total net sales and average daily sales improved over last quarter. Expanding our sales team continues to be a top priority and this quarter we added 30 sales reps. We are continuously improving our hiring, onboarding and training processes and are successfully attracting high-quality, experienced sales representatives to our organization. We plan to continue our sales force expansion.
“During the quarter we continued to streamline our operations. We finalized the sale of our non-core ASMP subsidiary. We also entered into a commitment to sell our Reno distribution center and leaseback only the portion we've been utilizing since the sale of Rutland Tools in 2010. This transaction is expected to provide net cash of approximately $8.4 million in the second quarter and will result in future operational savings. The operational investments and process improvements our team has made are yielding positive results. We remain highly committed to driving operational efficiencies while keeping our customer service levels high. With our previous investments in place we now have the platform to support sustainable, long-term sales growth and improved financial results," continued Mr. DeCata.
Financial Highlights
- Net sales increased 3.0% to $69.2 million in the first quarter of 2014, compared to $67.2 million in the first quarter a year ago.
- Average daily sales also increased by 3.0% in the first quarter of 2014 compared to the prior year quarter.
- The first quarter ended with 836 sales representatives, an increase of 30 during the quarter and the fourth consecutive quarter with a net sales rep increase.
- Adjusted non-GAAP operating results improved by $0.8 million in the first quarter of 2014 compared to 2013 (See reconciliation in Table 1).
First Quarter Results
Net sales for the first quarter of 2014 were $69.2 million versus $67.2 million for the first quarter of 2013. Average daily sales increased 3.0% to $1.098 million in the first quarter of 2014 from $1.067 million in the first quarter of 2013, and also increased 1.9% over the $1.078 million reported in the fourth quarter of 2013. The first quarter of both 2014 and 2013 included 63 selling days, compared to 61 selling days in the fourth quarter of 2013.
As new sales representatives are added, we anticipate a short-term decrease in average sales per sales representative per day, as new representatives build up customer relationships in their territories. This was reflected in the decline of sales per sales representative per day to $1,341 in the first quarter of 2014 compared to $1,400 in the first quarter of 2013 and $1,358 for the fourth quarter of 2013.
Gross profit for the period as a percentage of sales improved to 59.6%, compared to 59.2% in the first quarter of 2013, primarily due to lower outbound freight expense.
SG&A expenses decreased to $43.1 million or 62.2% of sales for the first quarter of 2014 from $43.3 million or 64.5% of sales in the same period last year. The decrease was primarily due to a non-recurring $1.2 million expense for a national sales meeting conducted in the first quarter of 2013 which was not held in 2014, lower health insurance costs, and the Company's continued focus on cost controls. These decreases were partially offset by severance and increased costs of hiring and onboarding new sales representatives. During the first quarter of 2014, the Company recorded a $2.9 million non-cash impairment loss related to the sale/leaseback of its Reno distribution center.
Excluding stock-based compensation, severance, the impairment charge and costs related to the 2013 national sales meeting, adjusted non-GAAP operating income was $0.1 million for the first quarter of 2014 compared to an adjusted operating loss of $0.7 million in the first quarter of 2013 (see reconciliation in Table 1). The improvement was primarily related to improved sales and gross margin percentages, partially offset by the cost of hiring and onboarding new sales representatives. Inclusive of the $2.9 million impairment loss on the Reno distribution facility, the operating loss for the first quarter of 2014 was $4.7 million compared to a loss of $3.5 million in the first quarter of 2013.
The net loss for the first quarter of 2014 was $3.0 million, or $0.34 per diluted share, as compared to a net loss of $3.2 million, or $0.37 per diluted share, for the same period a year ago.
First Quarter Corporate Highlights
- Completed the sale of substantially all of the assets of the Company’s wholly-owned subsidiary, Automatic Screw Machine Products Company, Inc., for net proceeds of $12.1 million. The transaction closed on February 14, 2014.
- Successfully entered into a letter of intent to sell the Reno distribution center for $8.7 million. As part of the transaction, the Company will enter into a 10-year lease for approximately one-half of the building which is the current space being utilized since the sale of Rutland Tools in 2010. Although a $2.9 million non-cash impairment charge related to the property was recognized in the first quarter of 2014, the Company will receive net cash of approximately $8.4 million in the second quarter and expects to realize net operating savings throughout the lease term.
