Lawson Products Reports First Quarter 2014 Results
Sales Growth Continues
Sales Force Expansion Accelerates
in 2014
“During the quarter we continued to streamline our operations. We
finalized the sale of our non-core ASMP subsidiary. We also entered into
a commitment to sell our Reno distribution center and leaseback only the
portion we've been utilizing since the sale of Rutland Tools in 2010.
This transaction is expected to provide net cash of approximately
Financial Highlights
-
Net sales increased 3.0% to
$69.2 million in the first quarter of 2014, compared to$67.2 million in the first quarter a year ago. - Average daily sales also increased by 3.0% in the first quarter of 2014 compared to the prior year quarter.
- The first quarter ended with 836 sales representatives, an increase of 30 during the quarter and the fourth consecutive quarter with a net sales rep increase.
-
Adjusted non-GAAP operating results improved by
$0.8 million in the first quarter of 2014 compared to 2013 (See reconciliation in Table 1).
First Quarter Results
Net sales for the first quarter of 2014 were
As new sales representatives are added, we anticipate a short-term
decrease in average sales per sales representative per day, as new
representatives build up customer relationships in their territories.
This was reflected in the decline of sales per sales representative per
day to
Gross profit for the period as a percentage of sales improved to 59.6%, compared to 59.2% in the first quarter of 2013, primarily due to lower outbound freight expense.
SG&A expenses decreased to
Excluding stock-based compensation, severance, the impairment charge and
costs related to the 2013 national sales meeting, adjusted non-GAAP
operating income was
The net loss for the first quarter of 2014 was
First Quarter Corporate Highlights
-
Completed the sale of substantially all of the assets of the Company’s
wholly-owned subsidiary,
Automatic Screw Machine Products Company, Inc. , for net proceeds of$12.1 million . The transaction closed onFebruary 14, 2014 . -
Successfully entered into a letter of intent to sell the Reno
distribution center for
$8.7 million . As part of the transaction, the Company will enter into a 10-year lease for approximately one-half of the building which is the current space being utilized since the sale of Rutland Tools in 2010. Although a$2.9 million non-cash impairment charge related to the property was recognized in the first quarter of 2014, the Company will receive net cash of approximately$8.4 million in the second quarter and expects to realize net operating savings throughout the lease term.
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 December 31, 2013, Form 10-K filed on February 20, 2014. 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 Operations | ||||||||||
| (Dollars in thousands, except per share data) | ||||||||||
| (Unaudited) | ||||||||||
| Three Months Ended March 31, | ||||||||||
| 2014 | 2013 | |||||||||
| Net sales | $ | 69,204 | $ | 67,213 | ||||||
| Cost of goods sold | 27,926 | 27,399 | ||||||||
| Gross profit | 41,278 | 39,814 | ||||||||
| Operating expenses: | ||||||||||
| Selling expenses | 21,280 | 21,607 | ||||||||
| General & administrative expenses | 21,797 | 21,737 | ||||||||
| Total SG&A | 43,077 | 43,344 | ||||||||
| Impairment loss | 2,914 | — | ||||||||
| Operating expenses | 45,991 | 43,344 | ||||||||
| Operating loss | (4,713 | ) | (3,530 | ) | ||||||
| Interest expense | (244 | ) | (213 | ) | ||||||
| Other expenses, net | (148 | ) | (61 | ) | ||||||
| Loss from continuing operations before income taxes | (5,105 | ) | (3,804 | ) | ||||||
| Income tax benefit | (783 | ) | (200 | ) | ||||||
| Loss from continuing operations | (4,322 | ) | (3,604 | ) | ||||||
| Income and gain from discontinued operations, net of income taxes | 1,367 | 381 | ||||||||
| Net loss | $ | (2,955 | ) | $ | (3,223 | ) | ||||
| Basic and diluted income (loss) per share of common stock: | ||||||||||
| Continuing operations | $ | (0.50 | ) | $ | (0.42 | ) | ||||
| Discontinued operations | 0.16 | 0.05 | ||||||||
| Net loss per share | $ | (0.34 | ) | $ | (0.37 | ) | ||||
| Basic and diluted weighted average shares outstanding | 8,659 | 8,606 | ||||||||
| Lawson Products, Inc. | ||||||||||
| Condensed Consolidated Balance Sheets | ||||||||||
| (Dollars in thousands, except per share data) | ||||||||||
| March 31, | December 31, | |||||||||
| 2014 | 2013 | |||||||||
| ASSETS | (Unaudited) | |||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 988 | $ | 698 | ||||||
| Restricted cash | 800 | 800 | ||||||||
| Accounts receivable, less allowance for doubtful accounts | 32,904 | 30,221 | ||||||||
| Inventories, net | 43,351 | 45,774 | ||||||||
| Miscellaneous receivables and prepaid expenses | 4,829 | 4,393 | ||||||||
| Deferred income taxes | 5 | 5 | ||||||||
| Property held for sale | 8,439 | — | ||||||||
| Discontinued operations | — | 8,960 | ||||||||
| Total current assets | 91,316 | 90,851 | ||||||||
| Property, plant and equipment, net | 45,588 | 58,974 | ||||||||
| Cash value of life insurance | 9,300 | 9,179 | ||||||||
| Deferred income taxes | 54 | 54 | ||||||||
| Other assets | 465 | 481 | ||||||||
| Discontinued operations | — | 406 | ||||||||
| Total assets | $ | 146,723 | $ | 159,945 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Revolving line of credit | $ | 11,635 | $ | 16,078 | ||||||
| Accounts payable | 10,040 | 14,787 | ||||||||
| Accrued expenses and other liabilities | 22,579 | 23,521 | ||||||||
| Discontinued operations | 1,150 | 564 | ||||||||
| Total current liabilities | 45,404 | 54,950 | ||||||||
| Security bonus plan | 15,865 | 16,143 | ||||||||
| Financing lease obligation | 10,028 | 10,223 | ||||||||
| Deferred compensation | 5,530 | 5,867 | ||||||||
| Deferred rent liability | 4,858 | 4,961 | ||||||||
| Other liabilities | 2,166 | 1,889 | ||||||||
| Total liabilities | 83,851 | 94,033 | ||||||||
| 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 – 8,670,512 shares and Outstanding – 8,658,885 shares |
8,671 | 8,671 | ||||||||
| Capital in excess of par value | 7,959 | 7,799 | ||||||||
| Retained earnings | 44,689 | 47,644 | ||||||||
| Treasury stock – 11,627 shares | (187 | ) | (187 | ) | ||||||
| Accumulated other comprehensive income | 1,740 | 1,985 | ||||||||
| Total stockholders’ equity | 62,872 | 65,912 | ||||||||
| Total liabilities and stockholders’ equity | $ | 146,723 | $ | 159,945 | ||||||
|
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 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, seasonal or non-operational items that impact the overall comparability. See Table 1 below for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three months ended March 31, 2014 and March 31, 2013. 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 (LOSS) | ||||||||||
| (Amounts in thousands) | ||||||||||
| (Unaudited) | ||||||||||
| Three Months Ended March 31, | ||||||||||
| 2014 | 2013 | |||||||||
| Operating loss, as reported per GAAP | $ | (4,713 | ) | $ | (3,530 | ) | ||||
| Stock-based compensation (1) | 1,125 | 1,596 | ||||||||
| Severance expense | 728 | — | ||||||||
| Impairment loss (2) | 2,914 | — | ||||||||
| National sales meeting | — | 1,225 | ||||||||
| Adjusted non-GAAP operating income (loss) | $ | 54 | $ | (709 | ) | |||||
| (1) | Expense for stock-based compensation, of which a portion varies with the Company's stock price | |
| (2) | Non-cash impairment charge related to the Reno distribution center | |
| LAWSON PRODUCTS, INC. | |||||||||||||||||||||
| TABLE 2 - QUARTERLY RESULTS (UNAUDITED) | |||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| Mar. 31, | Dec. 31, | Sep. 30, | Jun. 30, | Mar. 31, | |||||||||||||||||
| 2014 | 2013 | 2013 | 2013 | 2013 | |||||||||||||||||
| Number of business days | 63 | 61 | 64 | 64 | 63 | ||||||||||||||||
| Average daily net sales | $ | 1,098 | $ | 1,078 | $ | 1,066 | $ | 1,067 | $ | 1,067 | |||||||||||
| Sequential quarter increase (decrease) | 1.9 | % | 1.1 | % | (0.1 | )% | — | % | 0.9 | % | |||||||||||
| Average active sales rep. count (1) | 819 | 794 | 774 | 764 | 762 | ||||||||||||||||
| Period-end active sales rep. count | 836 | 806 | 784 | 773 | 760 | ||||||||||||||||
| Sales per rep. per day | $ | 1.341 | $ | 1.358 | $ | 1.377 | $ | 1.397 | $ | 1.400 | |||||||||||
| Sequential quarter increase (decrease) | (1.3 | )% | (1.4 | )% | (1.4 | )% | (0.2 | )% | 1.8 | % | |||||||||||
| Net sales | $ | 69,204 | $ | 65,738 | $ | 68,235 | $ | 68,317 | $ | 67,213 | |||||||||||
| Gross profit | 41,278 | 39,627 | 41,220 | 40,634 | 39,814 | ||||||||||||||||
| Gross profit percentage | 59.6 | % | 60.3 | % | 60.4 | % | 59.5 | % | 59.2 | % | |||||||||||
|
Operating expenses |
|||||||||||||||||||||
| Selling, general & administrative expenses | $ | 43,077 | $ | 40,101 | $ | 40,350 | $ | 40,835 | $ | 43,344 | |||||||||||
| Other expenses, net (2) | 2,914 | 2,528 | — | — | — | ||||||||||||||||
| 45,991 | 42,629 | 40,350 | 40,835 | 43,344 | |||||||||||||||||
| Operating income (loss) | $ | (4,713 | ) | $ | (3,002 | ) | $ | 870 | $ | (201 | ) | $ | (3,530 | ) | |||||||
| (1) | Average active sales representative count represents the average of the month-end sales representative counts | |
| (2) |
Three months ended March 31, 2014 includes a $2.9 million non-cash impairment charge related to the Reno distribution center. Three months ended December 31, 2013 includes $2.9 million expense related to the sublease of a portion of the Company's headquarters and a $0.4 million benefit related to the settlement of an employment tax matter. |
|
Source:
Investor Relations:
Lawson Products, Inc.
Ronald J.
Knutson
Executive Vice President and Chief Financial Officer
773-304-5665