CHICAGO — Lawson Products, Inc. (“Lawson” or the “Company”), a leading distributor of products and services to the MRO marketplace, today announced results for the first quarter ended March 31, 2021.
“Lawson had a productive first quarter building on its strong financial position placing itself in a good position to reinvest in the business to drive new growth initiatives. Sales for the quarter were $103.6 million, an improvement of 13.8% compared to the same quarter a year ago. Achieving quarterly sales in excess of $100 million is a milestone for us, and a direct result of our three-part growth strategy of expanding our sales force, improving sales rep productivity and executing on accretive acquisitions. All of this was accomplished while gaining cost efficiencies within the business,” said Michael DeCata, president and chief executive officer.
“I am encouraged by the improvement in our sequential sales and profitability as we exited 2020 and transitioned into 2021. Our reported and adjusted operating income was in line with our expectations. Sales of our organic business grew sequentially in the first quarter and we are positioned well for continued growth in 2021.
“During the quarter, we made significant progress in the integration of Partsmaster in terms of both product rationalization as well as operational synergies. We are pleased with the Partsmaster performance and it is an excellent strategic fit. The integration will allow us to more effectively serve customers with an expanded and complimentary product offering.
“While the pandemic presented us with some challenges, we successfully made a major acquisition, built on our strong financial position, reduced our overall cost structure and continued to re-invest in the business to drive future growth. After we pay the remaining balance due of $33 million for the Partsmaster acquisition in the second quarter, we anticipate that we will have approximately $90 million available under our $100 million committed credit facility to fund growth initiatives and future acquisitions,” concluded DeCata.
First Quarter Results
Net sales in the first quarter of 2021 were $103.6 million, an increase of 13.8% compared to $91.0 million in sales in the first quarter 2020. Partsmaster contributed $15.7 million in sales in the first quarter 2021. Excluding Partsmaster, total average daily sales decreased by 1.9% compared to the year ago quarter with one fewer selling day. Lawson sales, excluding Partsmaster, have continued to strengthen and are running at approximately 96% of pre-pandemic levels. On a consolidated basis, average daily sales were $1.644 million in the first quarter 2021 compared to $1.609 million in the fourth quarter of 2020 and $1.422 million in the prior year quarter. The year-over-year average daily sales increase was primarily driven by improvements in sales rep productivity and the inclusion of Partsmaster.
Gross profit increased $5.6 million to $54.6 million in the first quarter of 2021 compared to $48.9 million a year ago on higher sales. Gross profit as a percentage of sales was 52.7% for the first quarter of 2021 compared to 53.7% in the first quarter of 2020. The decline was primarily due to a one-time inventory reserve established for the rationalization of inventory related to the Partsmaster acquisition, a market driven write-down on personal protective equipment for which the selling price has fallen below cost and higher net transportation costs.
Selling expenses increased to $23.8 million in the first quarter of 2021 compared to $20.0 million in the prior year quarter. The increase was attributable to Partsmaster selling expense of $5.5 million partially offset by lower organic commission and travel expense. As a percentage of sales, selling expenses increased to 23.0% in the first quarter of 2021 from 22.0% in the first quarter of 2020 on a lower organic sales base, the reinstatement of normalized selling activities not performed during the pandemic and higher Partsmaster selling expenses as a percent to sales.
General and administrative expenses were $25.9 million in the first quarter of 2021 compared to $10.3 million in the prior year quarter. The majority of the difference is due to a $11.7 million fluctuation in the accounting for stock-based compensation. The remainder of the increase is primarily due to the inclusion of Partsmaster operating expenses of $3.3 million, and increased severance and employee acquisition costs of $0.6 million. Excluding these items, general and administrative expenses were $21.0 million for the first quarter of 2021, flat with the year ago quarter.
Reported operating income in the first quarter of 2021 was $4.8 million compared to reported operating income of $18.6 million in the first quarter of 2020. Adjusted operating income was $7.2 million for the quarter compared to $6.9 million in the fourth quarter of 2020 and $7.9 million in the year ago quarter. (See reconciliation in Table 1) For the first quarter of 2021, adjusted EBITDA was 8.8% of sales or $9.1 million compared to $9.0 million last quarter and $9.5 million for the prior year quarter. (See reconciliation in Table 1)
Reported net income was $3.6 million, or $0.39 per diluted share compared to net income of $12.5 million, or $1.34 per diluted share for the year ago quarter. Adjusted net income was $5.4 million or $0.58 per diluted share compared to $4.8 million or $0.52 per diluted share a year ago. (See reconciliation in Table 2)
At March 31, 2021, the Company had $26.3 million of unrestricted cash and cash equivalents with an additional $64.4 million of borrowing capacity under its $100.0 million committed credit facility which is net of the letter of credit securing the remaining acquisition liability. The outstanding $33.0 million liability for the Partsmaster acquisition will be paid in May of 2021.
Highlights
- Achieved first quarter sales of $103.6 million compared to sales of $98.1 million in the fourth quarter of 2020 and $91.0 million in the prior year quarter. Partsmaster contributed $15.7 million of sales in the first quarter of 2021. Sales excluding Partsmaster have rebounded to within 4% of pre-pandemic levels.
- Reported operating income was $4.8 million in the first quarter of 2021 compared to $18.6 million in the first quarter of 2020 which included a $10.7 million benefit from stock-based compensation due to the movement in our stock price in the early stages of the pandemic. Adjusted operating income was $7.2 million in the first quarter of 2021, a decrease from $7.9 million reported a year ago, but a 4.2% sequential increase over the $6.9 million reported in the fourth quarter of 2020. (See reconciliation in Table 1)
- Reported net income was $3.6 million for the quarter, or $0.39 per diluted share compared to $1.34 in the prior year quarter. On an adjusted basis, diluted earnings per share was $0.58 compared to $0.52 in the year ago quarter and $0.60 in the fourth quarter of 2020. (See reconciliation in Table 2)
- Cash on hand at the end of the quarter was $26.3 million along with availability under the $100.0 million committed credit facility of $64.4 million. This is net of the $33.0 million letter of credit securing the remaining acquisition payment due in May 2021.
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