Lawson Products Reports Third Quarter 2013 Results
Operating Income Improves by
Mr. DeCata added, “Over the past few quarters we have made good progress
improving the operational side of our business. With the
Financial Highlights
-
Net sales were
$68.2 million in the third quarter of 2013 compared to$67.9 million in the third quarter of last year. -
Operating income improved
$2.6 million to $0.9 million in the third quarter of 2013 compared to an operating loss of$1.7 million in the prior year quarter. -
Adjusted operating income of
$1.8 million for the quarter representing a$2.0 million improvement over the second quarter (see table 1). -
Strong cash flows led to a reduction of
$5.0 million in borrowings during the quarter.
Third Quarter Results
Net sales for the third quarter of 2013 increased to
Gross profit percentage for the quarter was 60.4% compared to 59.5% in
the second quarter and 62.6% a year ago. The improvement over the second
quarter was driven primarily by improved net freight recoveries and
lower distribution costs as a result of efficiencies gained from the
Company's
SG&A decreased to
Excluding severance, adjusted non-GAAP operating income was
Income from continuing operations for the third quarter of 2013 was
Recent Corporate Highlights
-
The Company furthered its focus to grow sales by redeploying savings
in general and administrative costs to its sales team resulting in a
severance charge of
$1.0 million for the quarter. -
On
October 11, 2013 , the Company entered into an Asset Purchase Agreement to sell substantially all of the net assets of its wholly owned subsidiary,Automatic Screw Machine Products Company, Inc. , for$12.5 million . The Company anticipates a pre-tax gain of approximately$1.5 million in the fourth quarter.
“Our Company is fundamentally sound and getting stronger. Service levels have improved significantly and we continue to make improvements that enhance our customers' experience. With an improved financial position, our organization is well positioned to focus on growing sales and making the necessary investments for future success,” concluded Mr. DeCata.
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, 2012, Form 10-K filed on
-TABLES FOLLOW-
All amounts have been reclassified to reflect discontinued operations treatment of the Company’s subsidiary, Automatic Screw Machine Products.
| Lawson Products, Inc. | ||||||||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Net sales | $ | 68,235 | $ | 67,863 | $ | 203,765 | $ | 209,057 | ||||||||
| Cost of goods sold | 27,015 | 25,368 | 82,097 | 90,539 | ||||||||||||
| Gross profit | 41,220 | 42,495 | 121,668 | 118,518 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative expenses | 39,424 | 42,836 | 123,601 | 131,455 | ||||||||||||
| Severance expense | 962 | 1,410 | 964 | 8,180 | ||||||||||||
| Gain on sale of assets | (36 | ) | (11 | ) | (36 | ) | (2,133 | ) | ||||||||
| Goodwill impairment | — | — | — | 28,306 | ||||||||||||
| 40,350 | 44,235 | 124,529 | 165,808 | |||||||||||||
| Operating income (loss) | 870 | (1,740 | ) | (2,861 | ) | (47,290 | ) | |||||||||
| Interest expense | (365 | ) | (229 | ) | (799 | ) | (453 | ) | ||||||||
| Other income (expense), net | (19 | ) | 23 | (150 | ) | (73 | ) | |||||||||
| Income (loss) from continuing operations before income taxes | 486 | (1,946 | ) | (3,810 | ) | (47,816 | ) | |||||||||
| Income tax expense (benefit) | 303 | (389 | ) | (398 | ) | 17,453 | ||||||||||
| Income (loss) from continuing operations | 183 | (1,557 | ) | (3,412 | ) | (65,269 | ) | |||||||||
| Discontinued operations, net of income taxes | 418 | 239 | 1,187 | 996 | ||||||||||||
| Net income (loss) | $ | 601 | $ | (1,318 | ) | $ | (2,225 | ) | $ | (64,273 | ) | |||||
| Basic and diluted income (loss) per share of common stock: | ||||||||||||||||
| Continuing operations | $ | 0.02 | $ | (0.18 | ) | $ | (0.40 | ) | $ | (7.61 | ) | |||||
| Discontinued operations | 0.05 | 0.03 | 0.14 | 0.12 | ||||||||||||
| Net income (loss) per share | $ | 0.07 | $ | (0.15 | ) | $ | (0.26 | ) | $ | (7.49 | ) | |||||
| Basic weighted average shares outstanding | 8,651 | 8,587 | 8,629 | 8,581 | ||||||||||||
| Effect of dilutive securities outstanding | 43 | — | — | — | ||||||||||||
| Diluted weighted average shares outstanding | 8,694 | 8,587 | 8,629 | 8,581 | ||||||||||||
| Lawson Products, Inc. | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (Dollars in thousands, except share data) | ||||||||
| September 30, 2013 | December 31, 2012 | |||||||
| ASSETS | (Unaudited) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 418 | $ | 1,640 | ||||
| Restricted cash | 800 | — | ||||||
| Accounts receivable, less allowance for doubtful accounts | 32,265 | 29,451 | ||||||
| Inventories, net | 44,509 | 44,681 | ||||||
| Miscellaneous receivables and prepaid expenses | 4,418 | 5,308 | ||||||
| Deferred income taxes | 17 | 17 | ||||||
| Discontinued operations | 9,938 | 9,232 | ||||||
| Total current assets | 92,365 | 90,329 | ||||||
| Property, plant and equipment, net | 62,157 | 66,981 | ||||||
| Cash value of life insurance | 8,609 | 14,943 | ||||||
| Deferred income taxes | 55 | 55 | ||||||
| Other assets | 497 | 449 | ||||||
| Discontinued operations | 395 | 174 | ||||||
| Total assets | $ | 164,078 | $ | 172,931 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Revolving line of credit | $ | 18,315 | $ | 16,127 | ||||
| Accounts payable | 14,181 | 11,421 | ||||||
| Accrued expenses and other liabilities | 23,990 | 31,330 | ||||||
| Discontinued operations | 485 | 950 | ||||||
| Total current liabilities | 56,971 | 59,828 | ||||||
| Security bonus plan | 16,435 | 18,837 | ||||||
| Financing lease obligation | 10,416 | 10,786 | ||||||
| Deferred compensation | 5,481 | 5,741 | ||||||
| Deferred rent liability | 4,367 | 4,621 | ||||||
| Other liabilities | 1,398 | 2,258 | ||||||
| Discontinued operations | — | 127 | ||||||
| Total liabilities | 95,068 | 102,198 | ||||||
| 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 - 8,660,279 and 8,614,837 shares, respectively; Outstanding - 8,650,919 and 8,605,901 shares, respectively | 8,660 | 8,615 | ||||||
| Capital in excess of par value | 7,655 | 6,951 | ||||||
| Retained earnings | 50,539 | 52,764 | ||||||
| Treasury stock – 9,360 and 8,936 shares, respectively | (159 | ) | (155 | ) | ||||
| Accumulated other comprehensive income | 2,315 | 2,558 | ||||||
| Total stockholders’ equity | 69,010 | 70,733 | ||||||
| Total liabilities and stockholders’ equity | $ | 164,078 | $ | 172,931 | ||||
| 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 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 September 30, 2013,
| TABLE 1 - RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP OPERATING INCOME (LOSS) | ||||||||||||
| (Amounts in thousands) | ||||||||||||
| (Unaudited) | ||||||||||||
| Three Months Ended | ||||||||||||
| September 30, | June 30, | September 30, | ||||||||||
| 2013 | 2013 | 2012 | ||||||||||
| Operating income (loss), as reported per GAAP | $ | 870 | $ | (201 | ) | $ | (1,740 | ) | ||||
| Severance expense | 962 | 2 | 1,410 | |||||||||
| Adjusted non-GAAP operating income (loss) | $ | 1,832 | $ | (199 | ) | $ | (330 | ) | ||||
| LAWSON PRODUCTS, INC. | ||||||||||||||||||||
| TABLE 2 - QUARTERLY RESULTS | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| Sep. 30, | Jun. 30, | Mar. 31, | Dec. 31, | Sep. 30, | ||||||||||||||||
| 2013 | 2013 | 2013 | 2012 | 2012 | ||||||||||||||||
| Number of business days | 64 | 64 | 63 | 61 | 63 | |||||||||||||||
| Average daily net sales | $ | 1,066 | $ | 1,067 | $ | 1,067 | $ | 1,057 | $ | 1,077 | ||||||||||
| Sequential quarter increase (decrease) | (0.1 | )% | — | % | 0.9 | % | (1.9 | )% | (1.3 | )% | ||||||||||
| Average active sales rep. count (1) | 774 | 764 | 762 | 769 | 773 | |||||||||||||||
| Period end active sales rep. count | 784 | 773 | 760 |
767 |
(2) |
769 | ||||||||||||||
| Sales per rep. per day | $ | 1.377 | $ | 1.397 | $ | 1.400 | $ | 1.375 | $ | 1.394 | ||||||||||
| Sequential quarter increase (decrease) | (1.4 | )% | (0.2 | )% | 1.8 | % | (1.4 | )% | 3.1 | % | ||||||||||
| Net sales | $ | 68,235 | $ | 68,317 | $ | 67,213 | $ | 64,505 | $ | 67,863 | ||||||||||
| Gross profit | 41,220 | 40,634 | 39,814 | 38,900 | 42,495 | |||||||||||||||
| Gross profit percentage | 60.4 | % | 59.5 | % | 59.2 | % | 60.3 | % | 62.6 | % | ||||||||||
|
Operating expenses |
||||||||||||||||||||
| Selling, general & administrative expenses | 39,424 | 40,833 | 43,344 | 38,590 | 42,836 | |||||||||||||||
| Severance expense (benefit) | 962 | 2 | — | (159 | ) | 1,410 | ||||||||||||||
| Gain on sale of assets | (36 | ) | — | — | (1,588 | ) | (11 | ) | ||||||||||||
| 40,350 | 40,835 | 43,344 | 36,843 | 44,235 | ||||||||||||||||
| Operating income (loss) | $ | 870 | $ | (201 | ) | $ | (3,530 | ) | $ | 2,057 | $ | (1,740 | ) | |||||||
|
(1) Average active sales representative count represents the average of the month-end sales representative counts |
||||||||||||||||||||
|
(2) Following the transition of the U.S. independent agents to employee status, the Company began January 1, 2013 with 757 sales representatives |
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Source:
Investor Relations:
Lawson Products, Inc.
Ronald J.
Knutson
Executive Vice President and Chief Financial Officer
773-304-5665