Chicago, IL - Lawson Products, Inc. announced results for the second quarter ended June 30, 2013.
Michael DeCata, president and chief executive officer, commented, “Despite a challenging macroeconomic environment, during the quarter, we continued to make progress in the transformation of our organization. We made significant gains in our key operating metrics. These include improved order completeness, better service levels and a decline in our customer backorders. With the final phase of the McCook, Illinois transition complete, we look forward to realizing expected operational efficiencies going forward. These improvements provide us a solid platform on which to grow the business.”
Financial Highlights
Net sales were $68.3 million in the second quarter of 2013 compared to $67.2 million in the first quarter of 2013 and $69.8 million in the second quarter of last year.
Lawson ended the quarter with 773 sales representatives, up 13 from March 31, 2013, and is on target to have more than 800 sales representatives by year-end. Sales representative productivity improved 3.3% on 5% fewer average sales representatives from a year ago.
Adjusted non-GAAP operating income was $1.7 million in the second quarter of 2013 compared to an adjusted operating loss of $5.2 million a year ago (See reconciliation in Table 1).
Income from Continuing Operations was essentially breakeven for the period compared to a loss of $61.5 million a year ago.
Second Quarter Results
Net sales for the second quarter of 2013 were $68.3 million versus $69.8 million for the second quarter of 2012. An improvement in sales force productivity of 3.3% from a year ago was offset by reduced sales coverage due to a 5% decline in the average number of sales representatives as compared to the prior year period. Average daily sales were consistent with the first quarter of 2013.
Gross profit for the second quarter of 2013 increased as a percent of sales to 59.5% from 51.2% a year-ago and 59.2% in the first quarter of 2013. The improvement over last year was primarily due to lower outbound net freight expense and lower reserves for excess and obsolete inventory as 2012 included a one-time $3.9 million charge specifically related to discontinuing certain products.
Excluding an increase in stock based compensation of $1.1 million and $0.7 million of depreciation expense, primarily related to the Company's new McCook, Illinois distribution center and corporate headquarters, selling, general and administrative expenses (“SG&A”) decreased $6.0 million or 13% for the second quarter of 2013 versus a year-ago (See reconciliation in Table 2). The decrease was primarily driven by reductions in compensation and consulting services, and benefits of actions taken in 2012 to reduce costs. SG&A was $40.8 million for the second quarter of 2013 compared to $45.0 million a year ago.
Excluding stock compensation and seasonal payroll related taxes, adjusted non-GAAP operating income was $1.7 million for the second quarter of 2013 (See reconciliation in Table 1). This represents an improvement of $6.9 million from an adjusted non-GAAP operating loss of $5.2 million in the prior year period and is consistent with the first quarter of 2013. The operating loss for the second quarter of 2013 was $0.2 million compared to a loss of $42.1 million in the second quarter of 2012.
Net income for the second quarter of 2013 was $0.4 million, or $0.05 per diluted share, as compared to a loss of $61.2 million, or $7.12 per diluted share, a year ago.
Second Quarter Corporate Highlights
Lawson completed the transition of its customer-facing operations previously performed at its Addison, Illinois, distribution center to its new McCook, Illinois, facility. The Company believes it will achieve future benefits from its McCook facility through increased operating efficiencies and enhanced customer service as a result of reductions in order delivery times and increased order fulfillment rates to support sales growth.
In June, the Company entered into a non-binding letter of intent to sell substantially all of the net assets of Automatic Screw Machine Products Company subsidiary for cash proceeds of approximately $12.5 million. The transaction is expected to be completed by the end of the third quarter of 2013.
“We are committed to growing our business and creating value for our shareholders. We will do so by providing our customers with high quality services and products, adding sales representatives, improving their productivity and enhancing our performance through improved operational efficiencies,” concluded Mr. DeCata.
