Lawson Products Reports Improved Third Quarter 2012 Results
--Positive Operating Income Excluding Severance Charge--
--Significant
Financial Highlights
-
Operating income of
$0.1 million prior to severance – an improvement of$2.8 million over the prior year -
Earnings before interest, taxes, depreciation and amortization
(“EBITDA”) of
$0.6 million . Excluding severance, adjusted EBITDA of$2.0 million – an improvement of$3.6 million over the prior year -
Ongoing implementation of the Company’s previously announced
$20.0 million of annualized savings resulting from restructuring initiatives - Sales per representative per day productivity improvement of 17.9% from a year ago
Third Quarter Results
Net sales for the third quarter of 2012 were
Gross profit for the third quarter of 2012 was
Selling, general and administrative expenses (“SG&A”) decreased by
Excluding
Net loss for the third quarter of 2012 was
Corporate Highlights
-
Leadership –
Michael G. DeCata joined Lawson as president and CEO onOctober 1, 2012 . Mr. DeCata brings significant experience in MRO distribution. He previously served as president of Chef’s Warehouse, a$300 million specialty food distributor and has also held senior positions atUnited Rentals ,WW Grainger andGeneral Electric . -
Sales Force Transformation – The Company is on target to
transition its independent agents located in
the United States to employees during the first quarter of 2013. Management expects minimal disruption while sales representatives continue to serve their customers. -
Distribution Network Consolidation – Lawson completed the
integration of the first of three
Illinois facilities into its new state-of-the-art facility inMcCook, Illinois . The Company expects to integrate the other two facilities over the next two quarters. The new facility will become the hub of Lawson’s distribution network and will help to improve the Company’s operating efficiency. - Website Launch – During the third quarter, Lawson completed the development and testing of its redesigned website. It will be launched beginning in the fourth quarter in phases that will continue into early 2013. The new website will be fully integrated with the Company’s ERP system.
Mr. DeCata commented, “Third quarter results show an improvement from where the Company was just a quarter ago. In the coming quarters, we will renew our emphasis on improving sales by building upon productivity enhancements, utilizing our new ERP system as our foundation for growth and restoring our sales force to a more effective level.”
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
-TABLES FOLLOW-
| LAWSON PRODUCTS, INC. | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||||||||||||||||
| (Amounts in thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Net sales | $ | 71,984 | $ | 75,366 | $ | 222,294 | $ | 242,099 | ||||||||
| Cost of goods sold | 28,624 | 32,820 | 100,784 | 101,315 | ||||||||||||
| Gross profit | 43,360 | 42,546 | 121,510 | 140,784 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative expenses | 43,311 | 45,335 | 132,777 | 137,026 | ||||||||||||
| Severance | 1,410 | 282 | 8,180 | 1,492 | ||||||||||||
| Gain on sale of assets | (11 | ) | - | (2,133 | ) | - | ||||||||||
| Goodwill impairment | - | - | 28,306 | - | ||||||||||||
| 44,710 | 45,617 | 167,130 | 138,518 | |||||||||||||
| Operating income (loss) | (1,350 | ) | (3,071 | ) | (45,620 | ) | 2,266 | |||||||||
| Other expense, net | (206 | ) | (20 | ) | (526 | ) | (524 | ) | ||||||||
| Income (loss) from continuing operations before income taxes | (1,556 | ) | (3,091 | ) | (46,146 | ) | 1,742 | |||||||||
| Income tax (benefit) expense | (240 | ) | (937 | ) | 18,095 | 758 | ||||||||||
| Income (loss) from continuing operations | (1,316 | ) | (2,154 | ) | (64,241 | ) | 984 | |||||||||
| Discontinued operations, net of income tax | (2 | ) | (9 | ) | (32 | ) | (61 | ) | ||||||||
| Net income (loss) | $ | (1,318 | ) | $ | (2,163 | ) | $ | (64,273 | ) | $ | 923 | |||||
| Basic income (loss) per share of common stock: | ||||||||||||||||
| Continuing operations | $ | (0.15 | ) | $ | (0.25 | ) | $ | (7.49 | ) | $ | 0.12 | |||||
| Discontinued operations | - | - | - | (0.01 | ) | |||||||||||
| Net income (loss) per share | $ | (0.15 | ) | $ | (0.25 | ) | $ | (7.49 | ) | $ | 0.11 | |||||
| Diluted income (loss) per share of common stock: | ||||||||||||||||
| Continuing operations | $ | (0.15 | ) | $ | (0.25 | ) | $ | (7.49 | ) | $ | 0.11 | |||||
| Discontinued operations | - | - | - | - | ||||||||||||
| Net income (loss) per share | $ | (0.15 | ) | $ | (0.25 | ) | $ | (7.49 | ) | $ | 0.11 | |||||
| Basic weighted average shares outstanding | 8,597 | 8,566 | 8,581 | 8,549 | ||||||||||||
| Dilutive effect of stock based compensation | - | - | - | 62 | ||||||||||||
| Diluted weighted average shares outstanding | 8,597 | 8,566 | 8,581 | 8,611 | ||||||||||||
| Cash dividends declared per share of common stock | $ | - | $ | 0.12 | $ | 0.24 | $ | 0.36 | ||||||||
| Net comprehensive loss | $ | (976 | ) | $ | (3,812 | ) | $ | (63,742 | ) | $ | (318 | ) | ||||
| LAWSON PRODUCTS, INC. | ||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
| (Amounts in thousands) | ||||||
| September 30, | December 31, | |||||
| 2012 | 2011 | |||||
| (Unaudited) | ||||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 774 | $ | 2,116 | ||
| Accounts receivable, less allowance for doubtful accounts | 36,553 | 43,239 | ||||
| Inventories, net | 54,596 | 55,498 | ||||
| Miscellaneous receivables and prepaid expenses | 5,425 | 7,064 | ||||
| Deferred income taxes | - | 5,716 | ||||
| Property held for sale | 1,869 | - | ||||
| Discontinued operations | 401 | 410 | ||||
| Total current assets | 99,618 | 114,043 | ||||
| Property, plant and equipment, net | 66,920 | 52,702 | ||||
| Cash value of life insurance | 14,740 | 15,490 | ||||
| Deferred income taxes | 40 | 11,864 | ||||
| Goodwill | - | 28,148 | ||||
| Other assets | 939 | 501 | ||||
| Total assets | $ | 182,257 | $ | 222,748 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Current liabilities: | ||||||
| Revolving line of credit | $ | 19,639 | $ | - | ||
| Accounts payable | 16,634 | 22,967 | ||||
| Accrued expenses and other liabilities | 33,765 | 28,231 | ||||
| Discontinued operations | 429 | 681 | ||||
| Total current liabilities | 70,467 | 51,879 | ||||
| Security bonus plan | 19,736 | 23,310 | ||||
| Deferred compensation | 6,055 | 9,279 | ||||
| Financing lease obligation | 10,995 | 3,377 | ||||
| Other liabilities | 6,096 | 731 | ||||
| 42,882 | 36,697 | |||||
| Total Stockholders’ Equity | 68,908 | 134,172 | ||||
| Total liabilities and stockholders’ equity | $ | 182,257 | $ | 222,748 | ||
|
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 the table below for supplemental
financial data and corresponding reconciliations to GAAP financial
measures for the three months ended
| TABLE 1 - RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP OPERATING INCOME | ||||||||
| (Amounts in thousands) | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended | ||||||||
| September 30, | ||||||||
| 2012 | 2011 | |||||||
| Operating loss, as reported per GAAP | $ | (1,350 | ) | $ | (3,071 | ) | ||
| Severance expense (1) | 1,410 | 282 | ||||||
| Adjusted non-GAAP operating income (loss) | $ | 60 | $ | (2,789 | ) | |||
| TABLE 2 - RECONCILIATION OF GAAP TO NON-GAAP EBITDA AND ADJUSTED EBITDA | ||||||||
| (Amounts in thousands) | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended | ||||||||
| September 30, | ||||||||
| 2012 | 2011 | |||||||
| Operating loss, as reported per GAAP | $ | (1,350 | ) | $ | (3,071 | ) | ||
| Depreciation & Amortization | 1,975 | 1,234 | ||||||
| EBITDA | 625 | (1,837 | ) | |||||
| Severance expense (1) | 1,410 | 282 | ||||||
| Adjusted EBITDA | $ | 2,035 | $ | (1,555 | ) | |||
| (1) | Three months ended September 30, 2012 includes $1.4 million of severance expense primarily related to the retirement of our former President and Chief Executive Officer. |
| LAWSON PRODUCTS, INC. | ||||||||||||||||||||||||
| TABLE 3 - QUARTERLY RESULTS | ||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||
| Sep. 30, | Jun. 30, | Mar. 31, | Dec. 31, | Sep. 30, | ||||||||||||||||||||
| 2012 | 2012 | 2012 | 2011 | 2011 | ||||||||||||||||||||
| Number of business days | 63 | 64 | 64 | 60 | 64 | |||||||||||||||||||
| Average daily net sales | $ | 1,143 | $ | 1,162 | $ | 1,187 | $ | 1,214 | $ | 1,178 | ||||||||||||||
| Sequential quarter increase (decrease) | (1.6 | )% | (2.1 | )% | (2.2 | )% | 3.1 | % | (10.4 | )% | ||||||||||||||
| Average active sales rep. count | 773 | 807 | 861 | 892 | 939 | |||||||||||||||||||
| Sales per rep. per day | $ | 1.478 | $ | 1.440 | $ | 1.379 | $ | 1.361 | $ | 1.254 | ||||||||||||||
| Sequential quarter increase (decrease) | 2.6 | % | 4.4 | % | 1.3 | % | 8.5 | % | (2.9 | )% | ||||||||||||||
|
|
||||||||||||||||||||||||
|
Net sales |
$ | 71,984 | $ | 74,348 | $ | 75,962 | $ | 72,860 | $ | 75,366 | ||||||||||||||
| Gross profit | 43,360 | 36,816 | (1 | ) | 41,334 | 38,993 | 42,546 | |||||||||||||||||
| Gross profit percentage | 60.2 | % | 49.5 | % | 54.4 | % | 53.5 | % | 56.5 | % | ||||||||||||||
| Operating expenses | ||||||||||||||||||||||||
|
Selling, general and administrative expenses |
43,311 | 45,484 | 43,982 | 44,265 | 45,335 | |||||||||||||||||||
| Severance | 1,410 | 6,585 | 185 | 122 | 282 | |||||||||||||||||||
| Loss (gain) on sale of assets | (11 | ) | (2,122 | ) | - | 22 | - | |||||||||||||||||
| Goodwill impairment | - | 28,306 | - | - | - | |||||||||||||||||||
| Other operating expenses | - | - | - | 2,346 | (2 | ) | - | |||||||||||||||||
| $ | 44,710 | $ | 78,253 | $ | 44,167 | $ | 46,755 | $ | 45,617 | |||||||||||||||
| Operating loss | $ | (1,350 | ) | $ | (41,437 | ) | $ | (2,833 | ) | $ | (7,762 | ) | $ | (3,071 | ) | |||||||||
| (1) | Gross profit for the three months ended June 30, 2012 includes a $3.9 million charge for discontinuing certain stocked products. | |
| (2) | 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. |
Source:
Investor Relations:
Lawson Products, Inc.
Ronald J.
Knutson
Executive Vice President and Chief Financial Officer
773-304-5665