Chicago, IL - On June 14, 2013, Lawson Products, Inc. entered into a non-binding letter of intent to sell substantially all of the assets of Automatic Screw Machine Products Company, Inc. ("ASMP"), its wholly owned subsidiary, to Nelson Stud Welding, Inc., an indirect subsidiary of Doncasters Group Limited, for a cash purchase price of $12.5 million, subject to adjustments based on the closing date net working capital, plus the assumption of certain liabilities. In addition, the transaction contemplates that Buyer will lease the real property located in Decatur, Alabama currently used by ASMP.
The company has now finalized this transaction.
Lawson Products Reports Fourth Quarter 2013 Results
Chicago, IL - Lawson Products, Inc. announced results for the fourth quarter ended December 31, 2013.
Michael DeCata, president and chief executive officer, commented, “The fourth quarter results reflect our continued progress to improve our operations and add to our sales force. Our previous investments and focus on cost controls now provide a platform for future growth. During 2013, we expanded our territorial coverage by adding 49 direct sales representatives. It was the first year in eight years that we increased our direct sales rep count and the second consecutive quarter with a sales increase over the prior year. The majority of these sales rep additions occurred during the second half of the year, of which 22 occurred in the fourth quarter as we accelerated our rate of hiring. We are encouraged by the early results and plan to continue our sales force expansion for the foreseeable future.
“Our team’s hard work over the past few years is beginning to translate into improved financial performance. In addition, during the quarter, we subleased a portion of our headquarters and will realize $2.9 million of future cash savings, favorably resolved a long-standing employment tax matter with the IRS, and entered into a definitive agreement to sell our non-core ASMP subsidiary for $12.5 million which has now closed. By eliminating these non-operational matters, we are now able to focus solely on our core operations. We believe our growing sales force, combined with continued operational efficiencies will better position us in the MRO marketplace and will translate into improved long-term financial results,” said Mr. DeCata.
- Net sales increased to $65.7 million in the fourth quarter of 2013, compared to $64.5 million in the fourth quarter of last year.
- Ended the fourth quarter with 806 sales representatives, compared to 757 at the beginning of the year, an increase of over 6%, and the third consecutive quarter in a row with a net sales rep increase.
- Adjusted non-GAAP operating income was $0.4 million in the fourth quarter versus $0.7 million in the prior year (See reconciliation in Table 1).
- Improved operating cash flows led to a $2.2 million reduction in borrowings during the fourth quarter.
Fourth Quarter Results
Net sales for the fourth quarter of 2013 were $65.7 million versus $64.5 million for the fourth quarter of 2012.
Average daily sales increased 2.0% to $1.078 million in the fourth quarter of 2013 from $1.057 million in the fourth quarter of 2012, and also increased 1.1% over the $1.066 million reported in the third quarter of 2013. Sales rep headcount increased by 22 reps from the end of the third quarter of 2013 to the end of the fourth quarter of 2013. The fourth quarter of both 2013 and 2012 included 61 selling days, compared to 64 days in the third quarter of 2013.
As new sales representatives are added, the Company anticipates 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 of $1,358 in the fourth quarter of 2013 compared to $1,375 in the fourth quarter of 2012. Gross profit for the period as a percentage of sales was 60.3%, consistent with the fourth quarter of 2012 and the third quarter of 2013.
SG&A expenses increased to $40.2 million for the fourth quarter of 2013 from $38.6 million in the same period last year. The increase was primarily driven by an increase in incentive compensation, higher depreciation expense and costs associated with the hiring and on-boarding of new sales representatives, partially offset by lower consulting fees. The Company continues to focus on its cost control measures.
Excluding a loss of $2.9 million associated with the sublease of a portion of the Company's corporate headquarters as required under lease accounting rules, stock-based compensation and severance, adjusted non-GAAP operating income was $0.4 million for the fourth quarter of 2013 compared to $0.7 million for the fourth quarter of 2012. The operating loss of $3.0 million for the fourth quarter of 2013 versus operating income of $2.0 million in the same period last year primarily resulted from a non-recurring $1.6 million gain on the sale of assets in 2012 and non-recurring charges of $2.9 million in the fourth quarter of 2013 (See reconciliation in Table 1).
Net loss for the fourth quarter of 2013 was $2.9 million, or $0.33 per diluted share, as compared to income of $1.7 million, or $0.20 per diluted share, for the same period last year.
Fourth Quarter Corporate Highlights
- Entered into an Asset Purchase Agreement to sell substantially all of the assets of the Company’s wholly-owned subsidiary, Automatic Screw Machine Products Company, Inc., for $12.5 million. The transaction closed on February 14, 2014 and the net proceeds were utilized to pay down existing debt.
- Entered into an agreement to sublease a portion of the Company’s leased headquarters, which will result in future net cash savings of approximately $2.9 million through the life of the sublease term of March 2023.
- Settled a previous employment tax matter with the IRS for $0.8 million which was less than the previously established reserve of $1.2 million.
“Improvements in our core operations will continue to make us more competitive in the MRO marketplace and lead to greater customer loyalty and additional business. With major investments and business enhancements behind us, we are now in a position to aggressively expand our sales force, continue to improve our processes and leverage our existing infrastructure,” concluded Mr. DeCata.