Lawson Products Reports 2012 Second Quarter Results
“We have returned to pre-ERP implementation customer service levels despite challenging top-line growth. As we continue to improve upon our operations, we expect to begin realizing benefits from our strategic restructuring initiatives in the second half of 2012.”
Second Quarter Results
Net sales for the second quarter of 2012 were
As part of the restructuring, the Company recorded additional inventory
reserves of
Excluding the restructuring related severance charge of
Excluding the aforementioned charges and the gain on sale of properties,
adjusted operating loss for the quarter ended
Net loss for the second quarter of 2012 was
Second Half 2012 Initiatives
As the Company continues to focus on its long-term transformation, the following events are expected to occur in the near future:
-
Sales force transformation – Lawson will continue the
transition of its independent agent model to an employee model. This
transition is planned to be completed in
the United States during the first quarter of 2013. Management anticipates minimal disruption while its sales representatives continue to service their existing customers. - Website launch – A redesigned website will be launched in a phased approach. The website will be fully integrated and allow orders to be placed directly on-line as well as enhancing the Company’s visibility to a broader base of customers.
-
Distribution network consolidation – The Company will
consolidate distribution operations currently performed at three
separate
Illinois locations into a new state-of-the-art leased facility inMcCook, Illinois . This facility will become the hub of Lawson’s distribution network and will help to improve the Company’s operating efficiency. -
Credit facility – The Company entered into a new five year
$40.0 million credit facility that provides the necessary liquidity to fund its future operations and continue its transformation.
Mr. Neri concluded, “We continue to take the necessary steps to transform the Company. We believe the recently completed restructuring and the implementation of our new ERP system, along with the initiatives scheduled to be completed in the near future, will enable us to better leverage our competitive advantages and reposition the Company for long-term growth and profitability.”
Conference Call
About
Founded in 1952,
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
| LAWSON PRODUCTS, INC. | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||||||||||||||||
| (Amounts in thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Net sales | $ | 74,348 | $ | 84,154 | $ | 150,310 | $ | 166,733 | ||||||||
| Cost of goods sold | 37,532 | 35,855 | 72,160 | 68,495 | ||||||||||||
| Gross profit | 36,816 | 48,299 | 78,150 | 98,238 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative expenses | 52,069 | 46,707 | 96,236 | 92,901 | ||||||||||||
| Goodwill impairment | 28,306 | - | 28,306 | - | ||||||||||||
| Gain on sale of assets | (2,122 | ) | - | (2,122 | ) | - | ||||||||||
| 78,253 | 46,707 | 122,420 | 92,901 | |||||||||||||
| Operating income (loss) | (41,437 | ) | 1,592 | (44,270 | ) | 5,337 | ||||||||||
| Other expense, net | (231 | ) | (8 | ) | (320 | ) | (504 | ) | ||||||||
| Income (loss) from continuing operations before income taxes | (41,668 | ) | 1,584 | (44,590 | ) | 4,833 | ||||||||||
| Income tax expense | 19,472 | 496 | 18,335 | 1,695 | ||||||||||||
| Income (loss) from continuing operations | (61,140 | ) | 1,088 | (62,925 | ) | 3,138 | ||||||||||
| Discontinued operations, net of income tax | (17 | ) | (22 | ) | (30 | ) | (52 | ) | ||||||||
| Net income (loss) | $ | (61,157 | ) | $ | 1,066 | $ | (62,955 | ) | $ | 3,086 | ||||||
| Basic income (loss) per share of common stock: | ||||||||||||||||
| Continuing operations | $ | (7.12 | ) | $ | 0.13 | $ | (7.33 | ) | $ | 0.37 | ||||||
| Discontinued operations | (0.00 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | ||||||||
| Net income (loss) per share | $ | (7.12 | ) | $ | 0.12 | $ | (7.34 | ) | $ | 0.36 | ||||||
| Diluted income (loss) per share of common stock: | ||||||||||||||||
| Continuing operations | $ | (7.12 | ) | $ | 0.13 | $ | (7.33 | ) | $ | 0.36 | ||||||
| Discontinued operations | (0.00 | ) | (0.01 | ) | (0.01 | ) | (0.00 | ) | ||||||||
| Net income (loss) per share | $ | (7.12 | ) | $ | 0.12 | $ | (7.34 | ) | $ | 0.36 | ||||||
| Basic weighted average shares outstanding | 8,587 | 8,550 | 8,581 | 8,541 | ||||||||||||
| Dilutive effect of stock based compensation | - | 60 | - | 67 | ||||||||||||
| Diluted weighted average shares outstanding | 8,587 | 8,610 | 8,581 | 8,608 | ||||||||||||
| Cash dividends declared per share of common stock | $ | 0.12 | $ | 0.12 | $ | 0.24 | $ | 0.24 | ||||||||
| Net comprehensive income (loss) | $ | (61,395 | ) | $ | 1,100 | $ | (62,766 | ) | $ | 3,494 | ||||||
| LAWSON PRODUCTS, INC. | ||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
| (Amounts in thousands) | ||||||
| June 30, | December 31, | |||||
| 2012 | 2011 | |||||
| (Unaudited) | ||||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 1,237 | $ | 2,116 | ||
| Accounts receivable, less allowance for doubtful accounts | 36,061 | 43,239 | ||||
| Inventories, net | 54,727 | 55,498 | ||||
| Miscellaneous receivables and prepaid expenses | 3,636 | 7,064 | ||||
| Deferred income taxes | - | 5,716 | ||||
| Property held for sale | 1,869 | - | ||||
| Discontinued operations | 385 | 410 | ||||
| Total current assets | 97,915 | 114,043 | ||||
| Property, plant and equipment, net | 64,495 | 52,702 | ||||
| Cash value of life insurance | 14,666 | 15,490 | ||||
| Deferred income taxes | 41 | 11,864 | ||||
| Goodwill | - | 28,148 | ||||
| Other assets | 535 | 501 | ||||
| Total assets | $ | 177,652 | $ | 222,748 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Current liabilities: | ||||||
| Revolving line of credit | $ | 14,800 | $ | - | ||
| Accounts payable | 15,542 | 22,967 | ||||
| Accrued expenses and other liabilities | 31,679 | 28,231 | ||||
| Discontinued operations | 433 | 681 | ||||
| Total current liabilities | 62,454 | 51,879 | ||||
| Security bonus plans | 20,773 | 23,310 | ||||
| Deferred compensation | 8,887 | 9,279 | ||||
| Financing lease obligation | 10,726 | 3,377 | ||||
| Other liabilities | 5,067 | 731 | ||||
| 45,453 | 36,697 | |||||
| Total Stockholders’ Equity | 69,745 | 134,172 | ||||
| Total liabilities and stockholders’ equity | $ | 177,652 | $ | 222,748 | ||
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 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 infrequently occurring or non-operational items that
impact the overall comparability. See the table below for supplemental
financial data and corresponding reconciliations to GAAP financial
measures for the three and six months ended
| TABLE 1 - RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP OPERATING INCOME | ||||||||||||||
| (Amounts in thousands) | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||
| June 30, | June 30, | |||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||
| Operating income (loss), as reported per GAAP | $ | (41,437 | ) | $ | 1,592 | $ | (44,270 | ) | $ | 5,337 | ||||
| Goodwill Impairment (1) | 28,306 | - | 28,306 | - | ||||||||||
| Severance expense (2) | 6,585 | 465 | 6,770 | 1,210 | ||||||||||
| Inventory rationalization (3) | 3,893 | - | 3,893 | - | ||||||||||
| Gain on sale of assets (4) | (2,122 | ) | - | (2,122 | ) | - | ||||||||
| Adjusted non-GAAP operating income (loss) | $ | (4,775 | ) | $ | 2,057 | $ | (7,423 | ) | $ | 6,547 | ||||
| (1) | Non-cash $28.3 million goodwill impairment charge. | |
| (2) | Includes a $6.6 million severance charge for an organizational restructuring plan in the second quarter of 2012. | |
| (3) | A non-cash $3.9 million charge was recorded as a result of discontinuing certain products. | |
| (4) | Three properties were sold during the quarter, resulting in a gain of $2.1 million. | |
| LAWSON PRODUCTS, INC. | |||||||||||||||||||||||
| TABLE 2 - QUARTERLY RESULTS | |||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Three months ended | |||||||||||||||||||||||
| Jun. 30, | Mar. 31, | Dec. 31, | Sep. 30, | Jun. 30, | |||||||||||||||||||
| 2012 | 2012 | 2011 | 2011 | 2011 | |||||||||||||||||||
| Average daily net sales | $ | 1,162 | $ | 1,187 | $ | 1,214 | $ | 1,178 | $ | 1,315 | |||||||||||||
| Sequential quarter increase (decrease) | (2.1 | )% | (2.2 | )% | 3.1 | % | (10.4 | )% | 0.3 | % | |||||||||||||
| Net sales | $ | 74,348 | $ | 75,962 | $ | 72,860 | $ | 75,366 | $ | 84,154 | |||||||||||||
| Gross profit | 36,816 | (1) | 41,334 | 38,993 | 42,546 | 48,299 | |||||||||||||||||
| Gross profit percentage | 49.5 | % | 54.4 | % | 53.5 | % | 56.5 | % | 57.4 | % | |||||||||||||
| Operating expenses | $ | 78,253 | (2) | $ | 44,167 | $ | 46,755 | (3) | $ | 45,617 | $ | 46,707 | |||||||||||
| Operating income (loss) | $ | (41,437 | ) | (4) | $ | (2,833 | ) | $ | (7,762 | ) |
$ |
(3,071 | ) | $ | 1,592 | ||||||||
| (1) | Gross profit for the three months ended June 30, 2012 includes a $3.9 million charge for discontinuing certain products. | |
| (2) | Operating expense for the three months ended June 30, 2012 includes a $28.3 million goodwill impairment charge, a $6.6 million restructuring charge and a $2.1 million gain on the sale of the properties. | |
| (3) | Operating expense for the three months ended December 31, 2011 includes a $1.2 million expense for the estimated cost of settling an employment tax matter and a $1.1 million impairment charge related to certain long-lived assets. | |
| (4) | Excluding items referred to in (1) and (2) above, operating loss for the quarter ended June 30, 2012 was $4.8 million. | |
Source:
Investor Relations:
Lawson Products, Inc.
Ronald J.
Knutson, 773-304-5665
Executive Vice President and Chief Financial
Officer