UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): | November 10, 2016 | |
LAWSON PRODUCTS, INC. |
(Exact name of registrant as specified in its charter) |
Delaware | 0-10546 | 36-2229304 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
8770 W. Bryn Mawr Ave., Suite 900, Chicago, Illinois | 60631 | |
(Address of principal executive offices) | (Zip Code) | |
(Registrant's telephone number, including area code) | (773) 304-5050 | |
Not Applicable |
(Former name or former address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 7.01 Regulation FD Disclosure.
Lawson Products, Inc. (the "Company") has updated its Investor Presentation (the “Presentation”) which is furnished as Exhibit 99.1 to this Report on Form 8-K. A copy of the Presentation is also available on the Company’s website at www.lawsonproducts.com.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits:
99.1 Investor Presentation November 2016
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
LAWSON PRODUCTS, INC. | ||
(Registrant) | ||
Date: November 10, 2016 | By: /s/ Ronald J. Knutson | |
Name: Ronald J. Knutson | ||
Title: Executive Vice President, Chief Financial Officer, Treasurer and Controller | ||
EXHIBIT INDEX
Exhibit Number | Description | |
99.1 | Investor Presentation November 2016 | |
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Investor
Presentation
November 2016
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Lawson Products, Inc.
"Safe Harbor" Statement under the Securities Litigation Reform Act of 1995:
This presentation 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 actual results to differ materially from
those described in the forward-looking statements. Factors that could cause or contribute to such differences
or that might otherwise impact the business include: failure to retain a talented workforce including productive
sales representatives; the inability of management to successfully implement strategic initiatives; failure to
manage change; the ability to adequately fund our operating and working capital needs through cash
generated from operations; the ability to meet the covenant requirements of our line of credit; disruptions of
the Company’s information and communication systems; the effect of general economic and market
conditions; inventory obsolescence; work stoppages and other disruptions at transportation centers or
shipping ports; changing customer demand and product mixes; increases in commodity prices; violations of
environmental protection regulations; a negative outcome related to tax matters; and, all other factors
discussed in the Company’s “Risk Factors” set forth in its Annual Report on Form 10-K for the year ended
December 31, 2015.
The Company undertakes no obligation to update any such factors or to publicly announce the results of any
revisions to any forward-looking statements contained herein whether as a result of new information, future
events or otherwise.
2
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Lawson Products: At a Glance
3
• Leading service based provider of consumables in MRO market
• Serves industrial, commercial, institutional and government markets in
all 50 states, Canada, Mexico, Puerto Rico and the Caribbean
• Headquartered in Chicago, IL
– 5 strategically located distribution centers
– Workforce ~1,500 (over 1,000 sales reps)
• Supplies a comprehensive line of products to the MRO marketplace
• VMI and private label drives high gross margins
Fasteners Cutting Tools Chemicals Hydraulics Other
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Competitive Advantages and Differentiators
“Not the Typical MRO Distributor”
What differentiates Lawson:
• Service intensive “high touch”
value proposition
• Vendor managed inventory or
“keep fill”
• Deep product knowledge
• Broad geographic sales and
service coverage throughout
the US and Canada
• Leverage investments in sales
team, facilities and technology
to enable outstanding
customer service
• Lowest total cost
4
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Our Commitment to our 70,000 Customers
High touch service and technical expertise drives customer relationships
One Company, Zero Headaches Inventory Management Options Access to Industry Knowledge &
Expertise
• Comprehensive line of products • Lawson Managed Inventory • Product recommendations from
your Lawson Representative
• Hundreds of pre-built assortments • Industrial vending • Application advice from our test
and application engineers
• Unlimited sourcing of hard-to-find
items
• Self-service inventory
management
• Complimentary on-site safety &
product usage training
5
Before After
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
(1) Other consists primarily of freight revenue offset by rebates
Customer and Product Profile
6
Fastening
Systems
21% Fluid Power
15%
Specialty
Chemicals
16%
Cutting Tools and
Abrasives
15%
Electrical
11%
Aftermarket
Automotive
Supplies
9%
Safety
4%
Welding and
Metal Repair
2%
Other
7%
Product Mix
Regional Accounts
55%
Strategic
12%
Kent Automotive
19%
Government
10%
Other (1)
4%
Customer Mix
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Lawson Growth Strategy
Sales Growth Driven By
Foundational Support
ERP
Network
Optimization
Sales
Transformation
Lean Six
Sigma
Website
Add New
Sales
Reps
Drive Sales
Rep
Productivity
Acquisitions
7
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
2016 Focus: Actions Across the Value Chain Driving Growth
Information Technology – Integration of Web and SAP
Lean Six Sigma
Sales Process /
Sales Reps
Customer
Service / Order
Entry
Product
Management /
Pricing
DC Operations
Sourcing /
Purchasing
• Increase sales rep
count
• Onboarding
process/training
• Sales
Management
dashboard
• EDI with
customers
• Reduction of
cycle times
• Order pad
• Consolidation of
shipments
• Sales service reps
• Leverage vendor
drop-ship
programs
• Fleet maintenance
focus
• Pricing
enhancements
• Website
• Reduce cycle time
• Refine “Pull”
strategy
• Freight
enhancements
• Minimize
backorders
• Improve service
levels
• Forecasting tool
• Supplier
negotiation
process
• Vendor metrics
• Electronic
communication
Add New Sales Reps and Drive Rep Productivity
8
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Longer Sales Rep Tenure Drives Rep Productivity
9
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
0
50
100
150
200
250
300
350
400
< 12 Mos. 1 - 2 Yrs. 3 - 5 Yrs. 5 - 10 Yrs. > 10 Yrs.
A
ve
ra
ge
A
n
n
u
al
Sal
e
s
in
T
h
o
u
sa
n
d
s
N
u
m
b
er
o
f
Sal
e
s
R
ep
s
Tenure with Lawson (as of 9/30/16)
Number of Reps Average Annual Sales
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Financial Highlights for Third Quarter 2016
• Ended Q3 2016 with 1,006 sales reps, up net 69 YTD
• Continued expansion through acquisitions
March 2016 Acquired Perfect Products Company of Michigan
May 2016 Acquired F.B. Feeney
• Strong gross margins – 60.6% in Q3 2016, 61.0% YTD
• Adjusted EBITDA margin improving
5.8% in Q3 v. 4.2% in Q2
Continued investment in new sales reps
Cost control measures in place
10
• Strong balance sheet
Net cash position of $10.7 million
Significant capital investments completed to support growth
$40 million credit facility in place – Recently extended
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Lawson Products: Poised for Growth
• Foundational Investments Completed
• Operational Excellence
• Leverage Current Infrastructure
• Continued Sales Force Expansion
• Large Fragmented Market
11
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
For More Information
Contact:
Ronald J. Knutson
EVP, CFO
Investor Relations
(773) 304-5665
ron.knutson@lawsonproducts.com
And see our Website at
http://www.lawsonproducts.com/company-info/investor-relations.jsp
12
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Appendices
13
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Significant Activities
Appendix P-1
14
August 2011 Implemented SAP
October 2011 Commenced construction of new McCook, Ill distribution center
May 2012 Relocated corporate headquarters
June 2012 Restructured senior team. Announced $20M cost savings plan
Transitioned packaging facility to McCook, Ill distribution center
Entered into new five-year $40M credit facility
Announced new CEO and President, Michael G. DeCata
Consolidated Vernon Hills distribution center into McCook, Ill
November 2012 Rolled out new website to existing web customers
December 2012 Completed transition of U.S. independent agents to employees
April 2013 Roll-out of new website to new web customers
April/May 2013 McCook DC begins to ship customer orders
November 2013 Entered into sub-lease of headquarters space to generate $2.9M of future cash savings
December 2013 Ended year with over 800 sales reps – First increase in 8 years
February 2014 Closed on Automatic Screw Machine Products sale for net proceeds of $12.1M
June 2014 Entered into sale-leaseback of Reno distribution facility for net proceeds of $8.3M
December 2014 Ended year with over 900 sales reps
February 2015 Held North American sales meeting
September 2015 Completed West Coast Fasteners acquisition
March 2016 Completed Perfect Products of Michigan acquisition
May 2016 Completed F. B. Feeney acquisition
June 2016 Expanded sales team to over 1,000 sales reps
September 2016 Extended credit facitlity to August, 2020
August 2012
October 2012
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Regulation G – GAAP Reconciliation
Appendix P-2
Non GAAP Reconciliation of Adjusted EBITDA to Sales Percentage
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, the Company's management believes
that certain non-GAAP financial measures may provide users of this financial information additional meaningful comparisons between current results and results in
prior operating periods. Management believes that these non-GAAP financial measures can provide additional meaningful reflection of underlying trends of the
business because they provide a comparison of historical information that excludes certain non-operational, non-recurring or intermittently recurring items that
impact the overall comparability. See the table below for supplemental financial data and corresponding reconciliations to GAAP financial measures for quarterly
adjusted EBITDA as a percentage of net sales. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported
results prepared in accordance with GAAP.
15
($ in thousands) Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
Net Sales $74,128 $70,281 $69,904 $ 70,726 $ 70,243 $ 64,961 $ 69,711 $ 69,348 $ 70,199
Operating Income (Loss) 678 (2,169) (947) 3,243 2,810 (2,985) 1,169 29 2,389
Depreciation & Amortization 2,160 2,133 2,096 2,126 2,119 2,202 2,187 2,226 1,973
EBITDA 2,838 (36) 1,149 5,369 4,929 (783) 3,356 2,255 4,362
Excluded Costs
Severance (328) (59) 571 50 372 280 204 143 367
Stock Based Compensation (Benefit) 2,423 2,443 (541) 971 (30) 1,693 (1,217) 515 (630)
Loss/(Gain) on Disposal of Property 97 45 - - (2) 9 - - -
Legal Settlement (688) - - - - - - - -
Remediation expense - 340 - - - 931 - - -
North American sales meeting - - 1,889 - - - - - -
Property Impairment Loss - - - - - - - - -
Adjusted EBITDA $ 4,342 $ 2,733 $ 3,068 $ 6,390 $ 5,269 $ 2,130 $ 2,343 $ 2,913 $ 4,099
Adjusted EBITDA % of Sales 5.9% 3.9% 4.4% 9.0% 7.5% 3.3% 3.4% 4.2% 5.8%
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Quarterly Results
Appendix P-3
16
(Dollars in thousands)
Three Months Ended
Sep. 30,
2016
Jun. 30,
2016
Mar. 31,
2016
Dec. 31,
2015
Sep. 30,
2015
Number of business days 64 64 64 61 64
Average daily net sales $ 1,097 $ 1,084 $ 1,089 $ 1,065 $ 1,098
Sequential quarter increase (decrease) 1.2 % (0.5 )% 2.3 % (3.0 )% (0.6 )%
Average active sales rep. count 1,007 981 949 931 917
Period-end active sales rep. count 1,006 1,020 960 937 925
Sales per rep. per day $ 1.089 $ 1.105 $ 1.148 $ 1.144 $ 1.197
Sequential quarter increase (decrease) (1.4 )% (3.7 )% 0.3 % (4.4 )% (1.2 )%
Net sales $ 70,199 $ 69,348 $ 69,711 $ 64,961 $ 70,243
Gross profit 42,573 42,526 42,459 39,091 43,342
Gross profit percentage 60.6 % 61.3 % 60.9 % 60.2 % 61.7 %
Operating expenses
Selling, general & administrative expenses $ 40,184 $ 42,497 $ 41,290 $ 41,145 $ 40,532
Other expenses, net — — — 931 —
40,184 42,497 41,290 42,076 40,532
Operating income (loss) $ 2,389 $ 29 $ 1,169 $ (2,985 ) $ 2,810
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Consolidated Balance Sheet
Appendix P-4
17
September 30, December 31,
2016 2015
ASSETS
Current assets:
Cash and cash equivalents $ 10,657 $ 10,765
Restricted cash 800 800
Accounts receivable, less allowance for doubtful accounts 31,637 27,231
Inventories, net 41,347 44,095
Miscellaneous receivables and prepaid expenses 4,292 3,667
Total current assets 88,733 86,558
Property, plant and equipment, net 31,989 35,487
Cash value of life insurance 9,985 10,245
Goodwill 2,074 319
Deferred income taxes 51 51
Other assets 1,024 434
Total assets $ 133,856 $ 133,094
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Revolving line of credit $ — $ 925
Accounts payable 11,340 9,370
Accrued expenses and other liabilities 21,378 26,048
Total current liabilities 32,718 36,343
Security bonus plan 14,321 14,641
Financing lease obligation 7,812 8,539
Deferred compensation 4,832 4,626
Deferred rent liability 3,803 3,912
Other liabilities 4,430 3,769
Total liabilities 67,916 71,830
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 - 8,824,385 and 8,796,264 shares, respectively
Outstanding - 8,798,273 and 8,771,120 shares, respectively
8,824
8,796
Capital in excess of par value 10,765 9,877
Retained earnings 46,586 43,572
Treasury stock – 26,112 and 25,144 shares, respectively (533 ) (515 )
Accumulated other comprehensive income 298 (466 )
Total stockholders’ equity 65,940 61,264
Total liabilities and stockholders’ equity $ 133,856 $ 133,094