CHICAGO — Lawson Products today announced results for the fourth quarter ended December 31, 2017.
“We finished 2017 with a 17.8% increase in average daily sales driven by both acquired revenue and a 6.1% growth within our Lawson business segment that helped drive our annual 2017 operating income to $9.9 million. The sales growth was driven by an 8.3% increase in sales per rep per day in the Lawson segment and the acquisition of The Bolt Supply House this past October. This acquisition, being our largest to date, was an important step in pursuing our growth strategy of acquiring companies that significantly add to our revenue and leverage our infrastructure to drive earnings,” said Michael DeCata, president and chief executive officer.
Fourth Quarter Highlights
- Acquired The Bolt Supply House (“Bolt Supply”) which contributed $8.0 million to sales in the quarter and was accretive to earnings by $0.05 to fully diluted earnings per share.
- Average daily sales increased 17.8% to $1.322 million during the fourth quarter of 2017 compared to $1.122 million in the fourth quarter of 2016. The Lawson business segment average daily sales increased 6.1% to $1.191 million versus a year ago.
- Gross profit increased $6.5 million to $47.0 million from $40.5 million in the prior year quarter on increased sales. Bolt Supply contributed $3.4 million of gross profit to the quarter.
- Recorded GAAP operating income of $0.2 million in the fourth quarter of 2017 compared to an operating loss of $5.0 milliona year ago. Excluding stock-based compensation, severance expense and acquisition related costs, adjusted non-GAAP operating income in the fourth quarter increased $0.7 million over a year ago (see reconciliation in Table 1).
- Recognized a $20.4 million net income tax benefit primarily as a result of re-establishing the majority of our U.S. deferred tax assets net of the impact of the Tax Cuts and Jobs Act.
Fourth Quarter Results
Net sales increased 19.8% to $80.6 million for the fourth quarter versus $67.3 million for the same period a year ago on one additional selling day in 2017. Sales per rep per day generated by the organic Lawson business increased 8.3% over the fourth quarter of 2016. Average daily sales grew 17.8% to $1.322 million in the recent quarter compared with $1.122 milliona year earlier. Fourth quarter sales benefitted from the Bolt Supply acquisition in the amount of $8.0 million along with continued growth in strategic customers, Kent Automotive and core accounts.
Fourth quarter gross profit increased 16.0% to $47.0 million from $40.5 million a year ago. The gross margin was 58.3% compared to 60.2% a year ago primarily as a result of the Bolt Supply acquisition. Gross profit from the organic Lawson business was $43.6 million or 59.9% in the fourth quarter of 2017. The slight decrease from the year ago quarter was primarily driven by disproportionate growth to larger strategic national customers, who typically generate lower product margins. Bolt Supply generated gross margin dollars of $3.4 million representing 43.2% of their sales.
Selling expenses as a percent of sales decreased to 31.1% from 34.7% from a year ago as fixed selling costs were leveraged over a higher sales base combined with Bolt Supply’s lower selling expenses. Nominally, selling expenses increased to $25.1 million in the fourth quarter of 2017 from $23.4 million in the prior year quarter due primarily to the Bolt Supply acquisition and an increase in compensation costs resulting from higher sales.
General and administrative expenses decreased to $21.7 million in the fourth quarter of 2017 from $22.2 million in the prior year quarter. This decrease was primarily due to lower stock-based compensation of $3.4 million as a portion varies with the company stock price and lower severance expenses of $1.5 million partially offset by restoring incentive compensation accruals and reflecting the operating expenses of Bolt Supply.
Due to improving financial results and increased confidence in generating future earnings, in accordance with GAAP, the Company re-established the majority of its U.S. deferred tax assets. This benefit was partially offset by the reduction in the federal income tax rate from 35% to 21% resulting in a net tax benefit of these items of $21.2 million for the quarter.
Operating income in the fourth quarter of 2017 was $0.2 million compared to an operating loss of $5.0 million a year ago. Adjusted non-GAAP operating income, adjusted for stock-based compensation, severance and acquisition costs, was $1.2 million in the fourth quarter of 2017 compared to $0.5 million a year ago (see reconciliation in Table 1).
Net income for the fourth quarter of 2017 was $20.2 million, or $2.21 per diluted share compared to a net loss of $4.6 million, or $0.53 per diluted share, for the same period a year ago. The earnings per diluted share benefitted from re-establishing our U.S. deferred tax assets net of the impact of the Tax Cuts and Jobs Act.
“In 2017, our 65th year in business, we realized encouraging operating and financial results from our strategy. The fundamentals of our business continue to get stronger. Our improved financial performance has been driven by the investments that we’ve made over the past several years that have allowed us to take advantage of the improving MRO marketplace. As demonstrated by our 2017 results we have a scalable infrastructure in place to drive additional levels of profitability and a scalable plan to drive organic and acquired sales growth,” concluded DeCata.Tagged with financial, lawson products