Lawson Profits Take Hit As Company Expands Sales Force

Michael DeCata, president and CEO, attributed the dip in profits to a couple of factors, including the addition of more sales representatives and slower overall industrial activity.

Id 23541 Lawson Products

Lawson Products on Thursday reported a profit of $1.8 million on net sales of $70.2 million. That's down from net income of $2.4 million, or $0.27 per diluted share, for the same period a year ago and $0.02 in the immediately preceding quarter. 

Michael DeCata, president and CEO, attributed the dip in profits to a couple of factors, including the addition of more sales representatives and slower overall industrial activity.

“Our sales and profitability improved sequentially over the second quarter, but continued to be negatively affected by the ongoing slower industrial activity impacting the MRO marketplace and the decreased demand from the oil and gas industry,” said DeCata. “Despite the ongoing economic challenges, we improved performance in the third quarter while continuing to invest in the company."

Lawson currently enlists 1,006 sales representatives, adding 69 net new sales reps and successfully integrating two acquisitions.

DeCata said that costs from increasing the number of sales reps over the past year has resulted in a a short-term negative impact on his company's operating income as those representatives build out their sales territories.

"Following the acceleration in the size of our sales force in the first two quarters of 2016, we purposely moderated the rate of hiring in the third quarter," DeCata said. "As planned, the pace of sales rep growth will be slower in the near future as we increase our efforts on providing training and support for our expanded sales force to enhance their productivity.”

Lawson ended the third quarter in a net cash position of $10.7 million, an improvement of $2.0 million for the quarter which was driven by income from operations and improved working capital management.

During the quarter, the company amended its credit facility to extend the due date to August 2020, increase its borrowing base, eliminate certain financial covenants and reduce its fees on the unused portion of the facility.

At September 30, the Company had no borrowings under its line of credit and had borrowing capacity of $34.8 million.

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