MRO products distributor Lawson Products reported 2021 second quarter financial results on Thursday, showing continued improvements in sequential organic sales, while a recent major acquisition powered the company to considerable year-over-year sales growth.
Chicago-based Lawson reported Q2 total sales of $106.5 million, up 47.7 percent year-over-year and the highest total in company history after Q1's $103.6 million was the firm's first $100 million quarter ever. Q2 had one additional selling day over Q1.
Lawson said that its organic sales — excluding its summer 2020 acquisition of Texas-based MRO distributor Partsmaster — were running at approximately 97 percent of pre-pandemic levels as of Thursday's earnings release. Partsmaster contributed $15.3 million in sales to Q2. Lawson's Q2 daily sales averaged $1.67 million, up from $1.64 million in Q1 and $1.13 million in Q2 2020.
The company's Q2 gross profit of $54.6 million improved from $38.3 million from a year earlier and was flat sequentially, with Q2 gross margin of 51.3 percent trailing Q1's 52.7 percent and 53.1 percent in Q2 2020.
Lawson said its Q2 organic MRO segment gross margin was 57.3 percent, down from 58.7 percent of a year earlier, primarily due to increased freight and additional costs from global supply chain disruptions, additional inventory reserves related to the Partsmaster acquisitions and changes in product and customer sales mix. To offset these costs, Lawson said it is currently implementing pricing actions.
Lawson's Q2 operating profit of $3.4 million, down from $4.8 million in Q1 and up from $0.6 million in Q2 2020. Adjusted operating profit of $6.8 million trailed Q1's $7.2 million and up from $4.8 million in Q2 2020. The company's total Q2 net profit of $2.9 million trailed Q1's $3.6 million and dwarfed the $0.6 million in Q2 2020.
"Our financial performance in this quarter benefited from continuing recovery in our customers' end markets combined with the inclusion of our 2020 Partsmaster acquisition and ongoing operational investments in our business to support sales rep productivity and our distribution capabilities," said Michael DeCata, Lawson Products president and CEO. "I continue to be encouraged by the positive trends in the quarter, including the organic growth of our business which underscores the value of our well-established vendor-managed inventory business model. Additionally, during the quarter we successfully transitioned the Partsmaster sales representatives to the Lawson platform and are now fulfilling their orders through the Lawson distribution network."
Lawson ended Q2 with 1,086 active sales reps, flat compared to Q1 and up from 938 at the end of Q2 2020.
Lawson made the final payment of its $35.6 million purchase of PartsMaster in May, and ended Q2 (June 30) with $91.9 million available in its $100 million committed credit facility.
Lawson was No. 31 on Industrial Distribution’s 2020 Big 50 List.
Lawson had a Q1 operating profit of $4.8 million, adjusted operating profit of $7.2 million and a net profit of $3.6 million. Gross margin of 52.7 percent declined from 53.7 percent from a year earlier, primarily due to a one-time inventory reserve tied to the Partsmaster acquisition and a write-down on PPE.
"Achieving quarterly sales in excess of $100 million is a milestone for us, and a direct result of our three-part growth strategy of expanding our sales force, improving sales rep productivity and executing on accretive acquisitions," said Michael DeCata, Lawson president and CEO. "All of this was accomplished while gaining cost efficiencies within the business."
"While the pandemic presented us with some challenges, we successfully made a major acquisition, built on our strong financial position, reduced our overall cost structure and continued to re-invest in the business to drive future growth." Decata added. "After we pay the remaining balance due of $33 million for the Partsmaster acquisition in the second quarter, we anticipate that we will have approximately $90 million available under our $100 million committed credit facility to fund growth initiatives and future acquisitions."