Lawson Products Reports Third Quarter 2017 Results
Average Daily Sales Increase 9.5%
Highlights
-
Average daily sales increased 9.5% to
$1.201 million during the third quarter of 2017 compared to$1.097 million in the third quarter of 2016 - Gross profit percentage increased to 60.8% in the third quarter compared to 60.6% a year ago
-
GAAP operating income was
$1.1 million compared to$2.4 million in the third quarter of 2016. Adjusted non-GAAP operating income, adjusted for stock-based compensation and severance, improved$1.5 million to$3.6 million from$2.1 million (see reconciliation in Table 1) -
We completed the fifth and largest acquisition in 24 months on
October 3rd that will add$34.0 million to our annual consolidated sales. The acquisition is not reflected in the third quarter results. -
The quarter ended with
$19.0 million of available cash, no outstanding debt and$36.0 million of availability on our revolving credit facility. As a result of the recent acquisition, the Company drew down$16.3 million of borrowings subsequent to the quarter.
"We are very pleased with our 68% improvement in adjusted operating
income on a 9.5% increase in average daily sales. The consistent
improvement in our financial performance is attributable to the
increased productivity of the sales force, recent acquisitions, and the
improving MRO marketplace. We continue to see strong increases with our
large national customers and regional business allowing us to leverage
our existing infrastructure," said
“We recently announced our fifth and largest acquisition in 24 months
adding
Third Quarter Results
Net sales were
Third quarter gross profit as a percent of sales increased to 60.8% from
60.6% a year ago. Gross profit dollars increased 8.1% to
Selling expenses increased to
General and administrative expenses increased to
Operating income in the third quarter of 2017 was
Net income for the third quarter of 2017 was
"Lawson’s improved performance is due in large part to the growth initiatives and expense controls that we have undertaken over the past several years. We remain committed to our plan of driving sales rep productivity, expanding our sales force and pursuing acquisitions to improve our financial results,” concluded Mr. DeCata.
Conference Call
About
Celebrating our 65th anniversary in 2017,
This Release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. The terms "may," "should," "could," "anticipate," "believe," "continues," "estimate," "expect," "intend," "objective," "plan," "potential," "project" and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These statements are based on management's current expectations, intentions or beliefs and are subject to a number of factors, assumptions and uncertainties that could cause or contribute to such differences or that might otherwise impact the business and include the risk factors set forth in Item 1A of the December 31, 2016, Form 10-K filed on February 23, 2017. The Company undertakes no obligation to update any such factor or to publicly announce the results of any revisions to any forward-looking statements whether as a result of new information, future events or otherwise.
-TABLES FOLLOW-
| Lawson Products, Inc. | ||||||||||||||||
| Condensed Consolidated Statements of Income | ||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net sales | $ | 75,651 | $ | 70,199 | $ | 225,274 | $ | 209,258 | ||||||||
| Cost of goods sold | 29,646 | 27,626 | 89,249 | 81,700 | ||||||||||||
| Gross profit | 46,005 | 42,573 | 136,025 | 127,558 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling expenses | 24,354 | 23,568 | 72,964 | 69,525 | ||||||||||||
| General & administrative expenses | 20,561 | 16,616 | 58,790 | 54,446 | ||||||||||||
| Total SG&A | 44,915 | 40,184 | 131,754 | 123,971 | ||||||||||||
| Gain on sale of property | — | — | (5,422 | ) | — | |||||||||||
| Operating expenses | 44,915 | 40,184 | 126,332 | 123,971 | ||||||||||||
| Operating income | 1,090 | 2,389 | 9,693 | 3,587 | ||||||||||||
| Interest expense | (133 | ) | (167 | ) | (393 | ) | (486 | ) | ||||||||
| Other income, net | 843 | 66 | 953 | 439 | ||||||||||||
| Income before income taxes | 1,800 | 2,288 | 10,253 | 3,540 | ||||||||||||
| Income tax expense | 479 | 463 | 802 | 526 | ||||||||||||
| Net income | $ | 1,321 | $ | 1,825 | $ | 9,451 | $ | 3,014 | ||||||||
| Basic income per share of common stock | $ | 0.15 | $ | 0.21 | $ | 1.07 | $ | 0.34 | ||||||||
| Diluted income per share of common stock | $ | 0.14 | $ | 0.20 | $ | 1.04 | $ | 0.34 | ||||||||
| Lawson Products, Inc. | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (Dollars in thousands, except share data) | ||||||||
| (Unaudited) | ||||||||
| September 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 19,043 | $ | 10,421 | ||||
| Restricted cash | 800 | 800 | ||||||
| Accounts receivable, less allowance for doubtful accounts | 37,290 | 30,200 | ||||||
| Inventories, net | 43,341 | 42,561 | ||||||
| Miscellaneous receivables and prepaid expenses | 3,755 | 3,788 | ||||||
| Total current assets | 104,229 | 87,770 | ||||||
| Property, plant and equipment, net | 26,844 | 30,907 | ||||||
| Cash value of life insurance | 11,623 | 10,051 | ||||||
| Goodwill | 5,789 | 5,520 | ||||||
| Deferred income taxes | 20 | 20 | ||||||
| Other assets | 905 | 1,039 | ||||||
| Total assets | $ | 149,410 | $ | 135,307 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Revolving line of credit | $ | — | $ | 841 | ||||
| Accounts payable | 12,207 | 11,307 | ||||||
| Accrued expenses and other liabilities | 30,831 | 27,289 | ||||||
| Total current liabilities | 43,038 | 39,437 | ||||||
| Security bonus plan | 13,347 | 14,216 | ||||||
| Financing lease obligation | 6,710 | 7,543 | ||||||
| Deferred compensation | 5,108 | 4,830 | ||||||
| Deferred rent liability | 3,473 | 3,676 | ||||||
| Other liabilities | 5,071 | 4,472 | ||||||
| Total liabilities | 76,747 | 74,174 | ||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $1 par value: | ||||||||
| Authorized - 500,000 shares, issued and outstanding — None | — | — | ||||||
| Common stock, $1 par value: | ||||||||
|
Authorized - 35,000,000 shares Issued - 8,921,302 and 8,864,929 shares, respectively Outstanding - 8,888,028 and 8,832,623 shares, respectively |
8,921 | 8,865 | ||||||
| Capital in excess of par value | 12,335 | 11,055 | ||||||
| Retained earnings | 51,216 | 41,943 | ||||||
| Treasury stock – 33,274 and 32,306 shares, respectively | (711 | ) | (691 | ) | ||||
| Accumulated other comprehensive income (loss) | 902 | (39 | ) | |||||
| Total stockholders’ equity | 72,663 | 61,133 | ||||||
| Total liabilities and stockholders’ equity | $ | 149,410 | $ | 135,307 | ||||
| LAWSON PRODUCTS, INC. |
| REGULATION G GAAP RECONCILIATIONS |
|
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, the Company's management believes that certain non-GAAP financial measures may provide users of this financial information with additional meaningful comparisons between current results and results in prior operating periods. Management believes that these non-GAAP financial measures can provide additional meaningful reflection of underlying trends of the business because they provide a comparison of historical information that excludes certain non-operational items that impact the overall comparability. See Tables below for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three and nine months ended September 30, 2017 and 2016. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP. |
| TABLE 1 - RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP OPERATING INCOME | ||||||||||||||||
| (Amounts in thousands) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Operating income, as reported per GAAP | $ | 1,090 | $ | 2,389 | $ | 9,693 | $ | 3,587 | ||||||||
| Stock-based compensation (1) | 2,337 | (630 | ) | 2,722 | (1,332 | ) | ||||||||||
| Severance expense | 139 | 367 | 595 | 714 | ||||||||||||
| Gain on sale of property (2) | — | — | (5,422 | ) | — | |||||||||||
| Adjusted non-GAAP operating income | $ | 3,566 | $ | 2,126 | $ | 7,588 | $ | 2,969 | ||||||||
(1) A portion of stock-based compensation expense varies with the Company's stock price
(2) Gain on sale of
| LAWSON PRODUCTS, INC. | ||||||||||||||||||||
| TABLE 2 - QUARTERLY RESULTS (UNAUDITED) | ||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| Sep. 30 | Jun. 30 | Mar. 31 | Dec. 31 | Sep. 30 | ||||||||||||||||
| 2017 | 2017 | 2017 | 2016 | 2016 | ||||||||||||||||
| Number of business days | 63 | 64 | 64 | 60 | 64 | |||||||||||||||
| Average daily net sales | $ | 1,201 | $ | 1,172 | $ | 1,166 | $ | 1,122 | $ | 1,097 | ||||||||||
| Sequential quarter increase | 2.5 | % | 0.5 | % | 3.9 | % | 2.3 | % | 1.2 | % | ||||||||||
| Average active sales rep. count (1) | 991 | 981 | 990 | 1,007 | 1,007 | |||||||||||||||
| Period-end active sales rep. count | 988 | 987 | 979 | 1,009 | 1,006 | |||||||||||||||
| Sales per rep. per day | $ | 1.212 | $ | 1.195 | $ | 1.178 | $ | 1.114 | $ | 1.089 | ||||||||||
| Sequential quarter increase (decrease) | 1.4 | % | 1.4 | % | 5.7 | % | 2.3 | % | (1.4 | )% | ||||||||||
| Net sales | $ | 75,651 | $ | 75,006 | $ | 74,617 | $ | 67,315 | $ | 70,199 | ||||||||||
| Gross profit | 46,005 | 45,141 | 44,879 | 40,504 | 42,573 | |||||||||||||||
| Gross profit percentage | 60.8 | % | 60.2 | % | 60.1 | % | 60.2 | % | 60.6 | % | ||||||||||
| Selling, general & administrative expenses | $ | 44,915 | $ | 42,672 | $ | 44,167 | $ | 45,548 | $ | 40,184 | ||||||||||
| Gain on sale of property (2) | — | (5,422 | ) | — | — | — | ||||||||||||||
| 44,915 | 37,250 | 44,167 | 45,548 | 40,184 | ||||||||||||||||
| Operating income (loss) | $ | 1,090 | $ | 7,891 | $ | 712 | $ | (5,044 | ) | $ | 2,389 | |||||||||
(1) Average active sales rep count represents the average of the month-ends
(2) Sale of
View source version on businesswire.com: http://www.businesswire.com/news/home/20171026005081/en/
Source:
Investor Relations:
Lawson Products, Inc.
Ronald J.
Knutson
Executive Vice President and Chief Financial Officer
773-304-5665