Chicago, IL -Lawson Products, Inc., a distributor of products and services to the MRO marketplace, today announced results for the first quarter ended March 31, 2013.
Michael DeCata, president and chief executive officer, commented, “We continued to sharpen our focus on growing sales during the first quarter. An important element of that refocusing was the transition of our U.S. sales force from independent agents to employees, which became effective on January 1, 2013. We are encouraged by the improvement in sales productivity that has begun to appear in our results. We believe this transition, along with other initiatives, including our enhanced website and the opening of our new McCook distribution center, will support additional sales growth.”
First Quarter Results
Net sales for the first quarter of 2013 decreased 5.2% to $72.0 million versus $76.0 million for the first quarter of 2012. The decrease was mainly driven by reduced sales coverage due to an 11% decline in the average number of sales representatives in the first quarter of 2013 compared to the prior year period. The decrease was partially offset by an improvement in sales force productivity of 8.8% from a year ago. Lower government sales and one less selling day in the 2013 quarter also negatively impacted sales. Average daily sales declined 3.7% to $1.143 million in the first quarter of 2013 from $1.187 million in the first quarter of 2012; however, average daily sales increased 2.2% sequentially from the fourth quarter of 2012.
Gross profit for the first quarter of 2013 was $41.0 million and increased as a percent of sales to 56.9% from 54.4% a year-ago. The increase was primarily due to improved freight recoveries compared to the prior year quarter and better than anticipated proceeds from the liquidation of discontinued products.
Selling, general and administrative expenses (“SG&A”) included a $1.2 million expense for the Company's national sales meeting, an increase of $1.4 million in stock based compensation and an increase of $0.5 million in payroll-related taxes primarily as a result of moving Lawson's U.S. independent agents to employee status effective January 1, 2013. Excluding these expenses, SG&A declined $3.2 million from the prior year quarter, primarily within compensation, consulting, travel and other expenses. Total SG&A expenses were $43.9 million for the quarter compared to $44.0 million a year ago.
Excluding the cost of the national sales meeting, stock based compensation and payroll-related taxes, adjusted non-GAAP operating income was $2.4 million for the first quarter of 2013 (See reconciliation in Table 1). This represents an increase of $2.9 million from an adjusted non-GAAP operating loss of $0.5 million in the prior year period and an increase of $0.4 million from adjusted non-GAAP income of $2.0 million in the fourth quarter of 2012. Operating loss for the first quarter of 2013 was $2.9 million compared to a loss of $2.8 million in the first quarter of 2012.
Net loss for the first quarter of 2013 was $3.2 million, or $0.37 per diluted share, compared to a net loss of $1.8 million, or $0.21 per diluted share, in the prior year period. Excluding the national sales meeting and the stock based compensation expense, net loss per diluted share was $0.05 for the first quarter of 2013 (See reconciliation in Table 2).
- The Company completed its transition from an independent agent model to an employee sales team in the United States and continued to increase its emphasis on productivity per sales representative. Upon completion of the transition, Lawson entered 2013 with 757 sales representatives. During 2013, Lawson intends to expand the number of sales areas covered and improve the penetration of sales in existing territories.
- Lawson launched its new e-commerce websites www.lawsonproducts.com and www.kent-automotive.com. These websites enable new and existing customers to perform product searches easily, obtain pricing and place orders directly via the Internet. These websites have been designed to improve cross-selling and up-selling activity, as well as enhance Lawson's visibility to customers when its sales team is not on-site with the customer.
- The Company conducted its first national sales meeting in six years. The meeting included training, a supplier trade show and updates on the Company's strategy. The event also provided the sales representatives an opportunity to network and share best practices.
- The Company is on schedule to complete the transition of the operations currently performed at its Addison, Illinois distribution center to its new packaging and distribution center in McCook, Illinois in the first half of 2013. As the McCook facility becomes fully operational, the Company believes it will begin to realize further efficiencies in its operations and enhance customer service through reductions in order delivery times and increased order fulfillment rates to support sales growth.
“In 2013, we will focus on increasing sales through a combination of adding sales representatives in under-served areas and improving sales productivity. We will also continue to improve our operational efficiency and leverage past investments made in our infrastructure. Lawson is well positioned for the future and we are confident in our ability to grow sales and improve our operating performance while better serving our customers,” concluded Mr. DeCata.