CHICAGO — Lawson Products, Inc. (“Lawson” or the “Company”), a leading distributor of products and services to the MRO marketplace, today announced results for the second quarter ended June 30, 2021.
“Lawson continues to generate solid operating results while maintaining a strong financial position. Despite widely reported global supply chain disruptions, sales grew to $107 million in the second quarter, demonstrating both sequential and year-over-year growth. Our financial performance in this quarter benefited from continuing recovery in our customers’ end markets combined with the inclusion of our 2020 Partsmaster acquisition and ongoing operational investments in our business to support sales rep productivity and our distribution capabilities,” said Michael DeCata, president and chief executive officer.
“I continue to be encouraged by the positive trends in the quarter, including the organic growth of our business which underscores the value of our well-established vendor managed inventory business model. Additionally, during the quarter we successfully transitioned the Partsmaster sales representatives to the Lawson platform and are now fulfilling their orders through the Lawson distribution network.”
“During the quarter, we made the final payment for the acquisition of Partsmaster while ending the quarter with nearly $92 million of available borrowing capacity under our $100 million committed credit facility. Our success has been built around improving sales rep productivity on our strong customer relationships while successfully integrating the Partsmaster acquisition on a reduced cost structure. While continuing to give due respect to the uncertainties and unevenness of the pandemic recovery, we remain in position to continue executing on all three pillars of our strategy to grow through sales rep productivity, expansion of our sales team and make accretive acquisitions on a reduced cost structure,” concluded DeCata.
- Achieved second quarter sales of $106.5 million compared to $72.1 million in the prior year quarter and $103.6 million in the first quarter. Sales, excluding Partsmaster, have rebounded to within 3% of pre-pandemic levels.
- Reported operating income was $3.4 million in the second quarter of 2021 compared to $0.6 million in the second quarter of 2020. Adjusted operating income was $6.8 million in the second quarter of 2021 compared to $4.8 million reported in the year ago quarter. (See reconciliation in Table 1)
- Reported net income of $2.9 million for the quarter, or $0.31 per diluted share compared to $0.07 in the prior year quarter. On an adjusted basis, diluted earnings per share was $0.60 compared to $0.37 in the year ago quarter. (See reconciliation in Table 2)
- Ended the quarter with cash on hand, net of borrowings of $0.9 million and $91.9 million of availability under the credit facility after final payment in May 2021 of the $33.0 million accrued acquisition liability for Partsmaster.
- In the quarter, the Board of Directors established a special committee of disinterested, independent directors to evaluate the transaction proposed by Luther King Capital Management (“LKCM) as disclosed in a Schedule 13D amendment filed by LKCM on May 17, 2021. The special committee has engaged legal and financial advisors to assist in its evaluation.
Second Quarter Results
Net sales in the second quarter of 2021 were $106.5 million, an increase of 47.7% compared to $72.1 million in sales in the second quarter 2020 and an increase of 2.9% compared to first quarter with one additional selling day over the first quarter of 2021. Partsmaster contributed $15.3 million in sales in the second quarter of 2021. Lawson sales, excluding Partsmaster, have continued to strengthen and are running at approximately 97% of pre-pandemic levels. On a consolidated basis, average daily sales were $1.665 million in the second quarter of 2021 compared with $1.644 million in the first quarter 2021 and $1.127 million in the prior year quarter. The year-over-year average daily sales increase was primarily driven by the improved business environment as a year ago quarter was in the early pandemic stage, the inclusion of Partsmaster sales and continued operational investments in the business to support sales rep productivity and expansion of our distribution capabilities.
Gross profit rose $16.3 million to $54.6 million in the second quarter of 2021 compared to $38.3 million in the year ago quarter primarily driven by higher sales and was flat with the first quarter of 2021. Gross profit as a percentage of sales was 51.3% for the second quarter of 2021 compared to 53.1% in the second quarter of 2020 and 52.7% last quarter. The organic Lawson MRO segment gross margin as a percent of sales declined to 57.3% in the second quarter of 2021 compared to 58.7% in the second quarter of 2020 quarter before the classification of certain service-related costs in gross profit. The year-over-year decline was primarily a result of increased freight and additional costs from the global supply chain disruption, additional inventory reserves related to the one-time rationalization of inventory related to the Partsmaster acquisition, and changes in product and customer sales mix. To offset these costs, the Company is currently implementing pricing actions.
Selling expenses were $24.2 million in the second quarter of 2021 compared to $16.3 million in the prior year quarter and $23.8 million in Q1 2021. The growth was primarily driven by higher compensation on increased sales, along with the inclusion of $5.3 million of Partsmaster selling expenses in the quarter. As a percentage of sales, selling expenses were 22.7%, essentially even versus the second quarter last year and down slightly from the 23.0% in the first quarter of 2021 on higher sales.
General and administrative expenses were $27.0 million in the second quarter of 2021 compared to $21.4 million in the prior year quarter and $25.9 million in the first quarter 2021. The increase compared to the prior year was driven by the inclusion of Partsmaster operating expenses of $3.3 million, $1.4 million of costs related to potential acquisitions and partly restored operating expenses on normalized sales volumes. These costs were offset by a decrease in stock-based compensation expense of $1.6 million compared to the second quarter of 2020.
Reported operating income in the second quarter of 2021 was $3.4 million compared to reported operating income of $0.6 million in the second quarter of 2020. Adjusted operating income was $6.8 million for the quarter compared to $4.8 million in the year ago quarter. (See reconciliation in Table 1) For the second quarter of 2021, adjusted EBITDA was 8.3% of sales or $8.8 million compared to $6.3 million for the prior year quarter and $9.1 million in the first quarter of 2021. (See reconciliation in Table 1)
Reported net income was $2.9 million, or $0.31 per diluted share compared to net income of $0.6 million, or $0.07 per diluted share for the year ago quarter and $3.6 million, or $0.39 per diluted share reported in the first quarter of 2021. Adjusted net income was $5.6 million or $0.60 per diluted share compared to $3.5 million or $0.37 per diluted share a year ago and $5.4 million, or $0.58 per diluted share last quarter. (See reconciliation in Table 2) On a year-to-date basis, adjusted net income has improved to $11.0 million or $1.17 per diluted share compared to $8.5 million or $0.93 per diluted share a year ago. (See reconciliation in Table 2)
At June 30, 2021, the Company ended the quarter with cash on hand, net of borrowings, of $0.9 million with $91.9 million, net of drawn letters of credit, of availability under its $100.0 million committed credit facility. The final payment for the Partsmaster acquisition was made in May 2021.Tagged with financial results, lawson products