Lawson Products Reports Second Quarter 2017 Results
Significant Improvement in Operating Income on 8.2% Sales Increase
Second Quarter Highlights
-
Sales increased 8.2% to
$75.0 million , compared to$69.3 million a year ago
-
GAAP operating income was
$7.9 million compared to break-even operating results in the second quarter of 2016. Adjusted operating income improved to$2.9 million from$0.7 million excluding the gain on the sale of real estate, stock-based compensation and severance (see reconciliation in Table 1) -
Fully diluted earnings per share was
$0.80 and improved to$0.20 from$0.02 on a recurring basis (see reconciliation in Table 2) -
The quarter ended with
$11.1 million of accessible cash, no outstanding debt and$35.5 million of availability on our revolving credit facility
“Average daily sales increased 8.2% year-over-year and 6.9% on an
organic basis. Over the past several quarters, we have seen an uptick in
our average daily sales and productivity of our reps. There were sales
increases across all customer categories including regional, large
national, Kent Automotive and government. Growth in our large national
accounts was driven primarily by our success in converting additional
locations and customer account expansion. Despite the shift in customer
mix, our gross margins remained above 60% generating significant growth
in gross margin dollars," said
“Coupled with managing operating costs down as a percent of sales, we
generated a significant improvement in our adjusted operating income to
"Our service intensive value proposition and sales reps’ deep product knowledge distinguishes us among MRO distributors and are helping to drive growth and expand our customer base. It's rewarding to see that our previous investments in our sales force and deliberate actions taken to improve sales rep productivity are having a positive impact on our performance. Our improving results, combined with an expanding industrial economy, makes us optimistic that these trends will continue,” stated Mr. DeCata.
Second Quarter Results
Net sales were
Gross profit increased to
Selling expenses increased to
General and administrative expenses decreased to
Operating income in the second quarter of 2017 was
Net income for the second quarter of 2017 was
At June 30, 2017, the Company had
“All of our 2016 acquisitions have been integrated and we are beginning to benefit from the increased sales and additional operating leverage. We remain committed to our plan and will continue to invest in the development of our sales reps as well as pursue additional acquisitions,” 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 June 30, |
Six Months Ended June 30, | |||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||
| Net sales | $ | 75,006 | $ | 69,348 | $ | 149,623 | $ | 139,059 | ||||||||||
| Cost of goods sold | 29,865 | 26,822 | 59,603 | 54,074 | ||||||||||||||
| Gross profit | 45,141 | 42,526 | 90,020 | 84,985 | ||||||||||||||
| Operating expenses: | ||||||||||||||||||
| Selling expenses | 23,806 | 23,204 | 48,610 | 45,957 | ||||||||||||||
| General & administrative expenses | 18,866 | 19,293 | 38,229 | 37,830 | ||||||||||||||
| Total S&A | 42,672 | 42,497 | 86,839 | 83,787 | ||||||||||||||
| Gain on sale of property | (5,422 | ) | — | (5,422 | ) | — | ||||||||||||
| Operating expenses | 37,250 | 42,497 | 81,417 | 83,787 | ||||||||||||||
| Operating income | 7,891 | 29 | 8,603 | 1,198 | ||||||||||||||
| Interest expense | (166 | ) | (153 | ) | (260 | ) | (319 | ) | ||||||||||
| Other (expenses) income, net | (115 | ) | 250 | 110 | 373 | |||||||||||||
| Income before income taxes | 7,610 | 126 | 8,453 | 1,252 | ||||||||||||||
| Income tax expense (benefit) | 337 | (46 | ) | 323 | 63 | |||||||||||||
| Net income | $ | 7,273 | $ | 172 | $ | 8,130 | $ | 1,189 | ||||||||||
| Basic income per share of common stock | $ | 0.82 | $ | 0.02 | $ | 0.92 | $ | 0.14 | ||||||||||
| Diluted income per share of common stock | $ | 0.80 | $ | 0.02 | $ | 0.89 | $ | 0.13 | ||||||||||
| Lawson Products, Inc. | ||||||||||
| Condensed Consolidated Balance Sheets | ||||||||||
| (Dollars in thousands, except share data) | ||||||||||
| (Unaudited) | ||||||||||
| June 30, | December 31, | |||||||||
| 2017 | 2016 | |||||||||
| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 11,123 | $ | 10,421 | ||||||
| Restricted cash | 800 | 800 | ||||||||
| Accounts receivable, less allowance for doubtful accounts | 35,017 | 30,200 | ||||||||
| Inventories, net | 42,373 | 42,561 | ||||||||
| Miscellaneous receivables and prepaid expenses | 3,492 | 3,788 | ||||||||
| Total current assets | 92,805 | 87,770 | ||||||||
| Property, plant and equipment, net | 27,547 | 30,907 | ||||||||
| Cash value of life insurance | 10,443 | 10,051 | ||||||||
| Goodwill | 5,681 | 5,520 | ||||||||
| Deferred income taxes | 20 | 20 | ||||||||
| Other assets | 934 | 1,039 | ||||||||
| Total assets | $ | 137,430 | $ | 135,307 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Revolving line of credit | $ | — | $ | 841 | ||||||
| Accounts payable | 7,206 | 11,307 | ||||||||
| Accrued expenses and other liabilities | 26,050 | 27,289 | ||||||||
| Total current liabilities | 33,256 | 39,437 | ||||||||
| Security bonus plan | 13,427 | 14,216 | ||||||||
| Financing lease obligation | 6,998 | 7,543 | ||||||||
| Deferred compensation | 5,026 | 4,830 | ||||||||
| Deferred rent liability | 3,637 | 3,676 | ||||||||
| Other liabilities | 4,388 | 4,472 | ||||||||
| Total liabilities | 66,732 | 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 - 8,907,639 and 8,864,929 shares, respectively | ||||||||||
| Outstanding - 8,874,365 and 8,832,623 shares, respectively | 8,908 | 8,865 | ||||||||
| Capital in excess of par value | 11,843 | 11,055 | ||||||||
| Retained earnings | 49,895 | 41,943 | ||||||||
| Treasury stock – 33,274 and 32,306 shares, respectively | (711 | ) | (691 | ) | ||||||
| Accumulated other comprehensive income (loss) | 763 | (39 | ) | |||||||
| Total stockholders’ equity | 70,698 | 61,133 | ||||||||
| Total liabilities and stockholders’ equity | $ | 137,430 | $ | 135,307 | ||||||
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.
| TABLE 1 - RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP OPERATING INCOME | ||||||||||
| (Amounts in thousands) | ||||||||||
| (Unaudited) | ||||||||||
| Three Months Ended June 30, | ||||||||||
| 2017 | 2016 | |||||||||
| Operating income, as reported per GAAP | $ | 7,891 | $ | 29 | ||||||
| Stock-based compensation (1) | 415 | 515 | ||||||||
| Severance (benefit) expense | (9 | ) | 143 | |||||||
| Gain on sale of property (2) | (5,422 | ) | — | |||||||
| Adjusted non-GAAP operating income | $ | 2,875 | $ | 687 | ||||||
| (1) | A portion of stock-based compensation expense varies with the Company's stock price | |
| (2) | Gain on sale of Fairfield, New Jersey distribution center | |
| TABLE 2 - RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP DILUTED EARNINGS PER SHARE | |||||||||
| (Unaudited) | |||||||||
| Three Months Ended June 30, | |||||||||
| 2017 | 2016 | ||||||||
| Diluted earnings per share, as reported per GAAP | $ | 0.80 | $ | 0.02 | |||||
| Gain on sale of property (1) | (0.60 | ) | — | ||||||
| Adjusted non-GAAP diluted earnings per share | $ | 0.20 | $ | 0.02 | |||||
| (1) | Gain on sale of Fairfield, New Jersey distribution center | |
| LAWSON PRODUCTS, INC. | |||||||||||||||||||||||||
| TABLE 3 - QUARTERLY RESULTS (UNAUDITED) | |||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||
| Jun. 30 | Mar. 31 | Dec. 31 | Sep. 30 | Jun. 30 | |||||||||||||||||||||
| 2017 | 2017 | 2016 | 2016 | 2016 | |||||||||||||||||||||
| Number of business days | 64 | 64 | 60 | 64 | 64 | ||||||||||||||||||||
| Average daily net sales | $ | 1,172 | $ | 1,166 | $ | 1,122 | $ | 1,097 | $ | 1,084 | |||||||||||||||
| Sequential quarter increase (decrease) | 0.5 | % | 3.9 | % | 2.3 | % | 1.2 | % | (0.5 | )% | |||||||||||||||
| Average active sales rep. count (1) | 981 | 990 | 1,007 | 1,007 | 981 | ||||||||||||||||||||
| Period-end active sales rep. count | 987 | 979 | 1,009 | 1,006 | 1,020 | ||||||||||||||||||||
| Sales per rep. per day | $ | 1.195 | $ | 1.178 | $ | 1.114 | $ | 1.089 | $ | 1.105 | |||||||||||||||
| Sequential quarter increase (decrease) | 1.4 | % | 5.7 | % | 2.3 | % | (1.4 | )% | (3.7 | )% | |||||||||||||||
| Net sales | $ | 75,006 | $ | 74,617 | $ | 67,315 | $ | 70,199 | $ | 69,348 | |||||||||||||||
| Gross profit | 45,141 | 44,879 | 40,504 | 42,573 | 42,526 | ||||||||||||||||||||
| Gross profit percentage | 60.2 | % | 60.1 | % | 60.2 | % | 60.6 | % | 61.3 | % | |||||||||||||||
| Selling, general & administrative expenses | $ | 42,672 | $ | 44,167 | $ | 45,548 | $ | 40,184 | $ | 42,497 | |||||||||||||||
| Gain on sale of property (2) | (5,422 | ) | — | — | — | — | |||||||||||||||||||
| 37,250 | 44,167 | 45,548 | 40,184 | 42,497 | |||||||||||||||||||||
| Operating income (loss) | $ | 7,891 | $ | 712 | $ | (5,044 | ) | $ | 2,389 | $ | 29 | ||||||||||||||
| (1) | Average active sales rep count represents the average of the month-ends | |
| (2) | Sale of Fairfield, New Jersey, distribution center | |
View source version on businesswire.com: http://www.businesswire.com/news/home/20170727005146/en/
Source:
Investor Relations:
Lawson Products, Inc.
Ronald J.
Knutson
Executive Vice President and Chief Financial Officer
773-304-5665