Chicago, IL - Lawson Products, Inc. announced results for the third quarter ended September 30, 2013.
Michael DeCata, president and chief executive officer, commented, “I am pleased with our third quarter progress. This was the first quarter in nine quarters in which Lawson realized a year-over-year net sales increase. We will continue to focus our efforts on sales growth including adding to our sales force. During the quarter we added 11 sales representatives putting us on track to finish the year with more than 800 active sales reps. We are encouraged to see that these efforts have begun to drive sales improvements.”
Mr. DeCata added, “Over the past few quarters we have made good progress improving the operational side of our business. With the McCook distribution center now on-line, customer service levels have improved and significant process enhancements are underway. We are now beginning to operate more efficiently, which has led to higher customer satisfaction and lower operating costs.”
Financial Highlights
Net sales were $68.2 million in the third quarter of 2013 compared to $67.9 million in the third quarter of last year. Operating income improved $2.6 million to $0.9 million in the third quarter of 2013 compared to an operating loss of $1.7 million in the prior year quarter. Adjusted operating income of $1.8 million for the quarter representing a $2.0 million improvement over the second quarter. Strong cash flows led to a reduction of $5.0 million in borrowings during the quarter.
Third Quarter Results
Net sales for the third quarter of 2013 increased to $68.2 million with one additional selling day from $67.9 million in the third quarter of 2012. The Company ended the quarter with 784 sales representatives, an increase of 11 from the second quarter of 2013 and an increase of 27 from the beginning of the year. Average daily sales were flat with the second quarter and decreased slightly to $1.066 million in the third quarter of 2013 compared to $1.077 million a year ago. Average daily sales per sales representative decreased slightly, as a proportion of newly hired sales reps in the early stages of building up customer relationships in their territories has increased. During the third quarter there were 64 selling days. Due to the upcoming holiday season, there will be three fewer selling days in the fourth quarter.
Gross profit percentage for the quarter was 60.4% compared to 59.5% in the second quarter and 62.6% a year ago. The improvement over the second quarter was driven primarily by improved net freight recoveries and lower distribution costs as a result of efficiencies gained from the Company's McCook facility. The year ago quarter benefited from the sell through of previously discontinued products.
SG&A decreased to $39.4 million for the third quarter of 2013 compared to $42.8 million a year ago. The decrease was primarily driven by reductions in compensation and outside consulting services as the Company continues to focus on cost control measures.
Excluding severance, adjusted non-GAAP operating income was $1.8 million for the third quarter of 2013. This represents an improvement of $2.2 million over the prior year quarter and an improvement of $2.0 million over the second quarter of 2013. Operating income was $0.9 million for the third quarter of 2013 compared to a loss of $1.7 million in the third quarter of 2012.
Income from continuing operations for the third quarter of 2013 was $0.2 million, or $0.02 per diluted share, as compared to a loss of $1.6 million, or $0.18 per diluted share, a year ago.
Recent Corporate Highlights
- The Company furthered its focus to grow sales by redeploying savings in general and administrative costs to its sales team resulting in a severance charge of $1.0 million for the quarter.
- On October 11, 2013, the Company entered into an Asset Purchase Agreement to sell substantially all of the net assets of its wholly owned subsidiary, Automatic Screw Machine Products Company, Inc., for $12.5 million. The Company anticipates a pre-tax gain of approximately $1.5 million in the fourth quarter.
“Our Company is fundamentally sound and getting stronger. Service levels have improved significantly and we continue to make improvements that enhance our customers' experience. With an improved financial position, our organization is well positioned to focus on growing sales and making the necessary investments for future success,” concluded Mr. DeCata.
