DES PLAINES, Ill.-- Lawson Products, Inc., a distributor of products and services to the MRO and OEM marketplaces, today announced results for the third quarter of 2010. During the quarter, the Company continued to execute its plan to achieve long-term growth through operational, infrastructure and sales enhancements. The third quarter results provide evidence of the success of this strategy.
Highlights:
- Net sales increase of 6.2% over the prior year quarter to $89.3 million.
- Quarterly operating income of $8.6 million, an increase from $3.6 million in the prior year quarter.
- Adjusted operating income (excluding severance and a favorable legal settlement) of $6.5 million, a 59.6% or $2.4 million improvement over the prior year quarter.
- At September 30, 2010, cash on hand was $23.2 million with no debt outstanding.
Net sales for the third quarter of 2010 were $89.3 million, a 6.2% increase over $84.1 million for the prior year period, primarily from continued growth with the Company’s strategic, governmental and automotive customers. These, as well as the Company’s other customer segments, continued to respond positively to the Company’s tailored solutions, new product offerings and technical expertise.
Gross profit increased to $56.1 million in the third quarter of 2010, a $2.0 million improvement over the prior year third quarter. Selling, general and administrative expenses (SG&A) decreased 0.9% and decreased as a percent of sales. The Company was able to realize lower SG&A through additional efficiencies and productivity gains while continuing to invest in its ongoing sales transformation, network optimization and Enterprise Resource Planning (ERP) initiatives. The Company incurred $1.6 million of ERP expenses during the quarter. These investments are strengthening the Company’s foundation for future growth by streamlining core business functions of its MRO business, enhancing the overall customer experience and improving sales effectiveness.
Operating income in the third quarter of 2010 was $8.6 million compared to $3.6 million in 2009. The Company reported income from continuing operations of $5.9 million or $0.69 per share in the third quarter of 2010 compared to income from continuing operations of $2.8 million or $0.33 per share in the third quarter of 2009.
During the quarter, the Company finalized a pending legal claim against a competitor in favor of the Company in the amount of $4.1 million of which $3.5 million was realized in the quarter. Excluding severance of $1.5 million and the legal settlement of $3.5 million, adjusted non-GAAP operating income for the quarter was $6.5 million compared to $4.1 million in last year’s period. These items positively impacted diluted earnings per share from continuing operations for the quarter by $0.16. Net income diluted earnings per share was negatively impacted by $0.29 per share from discontinued operations.
During the third quarter, the Company continued to make significant progress on key business initiatives:
- Completed the blueprint phase of ERP. This will enable the Company to implement the new ERP system with a phased roll out commencing in the second quarter of 2011.
- Improved agent sales productivity. Transitioned independent agent district managers to employee district sales managers.
- Sold non-core assets and liabilities of Assembly Component Systems (ACS). The transaction resulted in a $19.0 million selling price which the Company will utilize to invest in the MRO business.
Thomas Neri, president and chief executive officer commented, “I am very pleased with our third quarter operating performance. Our team has worked hard to execute our business plan and the results reflect their progress. We continue to focus on transforming our business and have made significant progress with our ERP implementation and sales force restructuring. The sale of our ACS business generated cash and freed up valuable resources that we will use to further invest in our MRO business. We believe these past and planned future investments as well as operational improvements will strengthen our business, deliver long-term shareholder value and enhance the customer experience.”
Net sales for the nine months ended September 30, 2010, were $260.1 million, a 2.2% improvement over net sales of $254.5 million in the first nine months of 2009. Gross profit increased to $163.3 million for the nine months ended September 30, 2010, a $3.4 million increase over last year’s period. Gross profit as a percent of sales remained constant at 62.8% for both the nine months ended September 30, 2010 and 2009. Selling, general and administrative expenses decreased 2.0% and decreased as a percent of sales, driven by streamlining the Company’s cost structure, including the closure of the Dallas and Charlotte distribution centers in 2009 and a 9% staff reduction.
Operating income for the nine months ended September 30, 2010 was $15.7 million compared to $0.5 million in 2009. The Company reported income from continuing operations of $9.5 million or $1.11 per share of common stock in the first nine months of 2010, compared to income from continuing operations of $0.6 million or $0.07 per share in the comparable 2009 period. Excluding severance of $3.2 million, a favorable legal settlement of $4.1 million and the gain on the disposal of property of $1.7 million, adjusted non-GAAP operating income for the quarter was $13.1 million compared to $6.7 million in 2009. These non-recurring items positively impacted diluted earnings per share from continuing operations for the nine months ended September 30, 2010 by $0.19. Net income diluted earnings per share was negatively impacted by $0.24 per share from discontinued operations.
