“Our excellent first quarter results reflect the continued benefits from our previous investments and process improvements. Again this quarter, we demonstrated our ability to drive profitable sales growth and leverage our infrastructure to accelerate profitability. We delivered an 8.2% sales increase while our operating income grew to $5.5 million compared to $1.8 million a year ago. This performance was driven by increased Lawson sales rep productivity, sales growth at Bolt Supply, and the inclusion of Screw Products. We efficiently managed our operating expenses which enhanced the growth of our adjusted operating income by 74% in the quarter,” said Michael DeCata, president and chief executive officer.
“Our sales increase was from broad-based growth in all Lawson segments and within Bolt Supply. We also continue to improve sales rep productivity through ongoing training, support and improved customer fulfillment processes while holding expenses in line to drive a substantial increase in earnings per share. Our stronger results over the past two years are very encouraging as our earnings continue to increase at a rate much higher than our sales growth,” said DeCata.
- Sales of $91.3 million, increased 8.2% year-over-year. Average daily sales (“ADS”) also increased 8.2% to $1.450 million in the first quarter 2019 compared to $1.341 million in the first quarter of 2018
- Lawson MRO segment ADS increased 6.9% primarily due to a 4.4% improvement in sales rep productivity
- Operating income improved to $5.5 million, compared to $1.8 million in the first quarter of 2018. Non-GAAP adjusted operating income was $6.0 million compared to $3.4 million a year ago, up 74.1%. Adjusted EBITDA of $7.5 million increased 45.6% from $5.1 million from a year ago (See reconciliation in Table 1)
- Net income was $4.1 million or $0.44 per diluted share in the first quarter 2019 compared to $0.13 a year ago. Adjusted net income, excluding stock-based compensation and severance, was $4.5 million or $0.48 per diluted share compared to adjusted per diluted share of $0.25 a year ago (See reconciliation in Table 2)
|First Quarter 2019 Summary Financial Highlights||Three Months Ended March 31,|
|($ in millions)||2019||2018||Change|
|Average Daily Net Sales||$1.450||$1.341||8.2%|
|Number of Business Days||63||63|
|Reported Operating Income||$5.5||$1.8||NM|
|Adjusted Operating Income (1)||$6.0||$3.4||74.1%|
|Adjusted EBITDA (1)(2)||$7.5||$5.1||45.6%|
|Margin (1) (2)||8.2%||6.1%||+210 bps|
|Earnings Per Share||$0.44||$0.13||$0.31|
(1) Excludes the impact of stock-based compensation and severance.
(2) 2019 includes the adoption of ASC 842 – Leases which requires certain expenses previously recognized as depreciation expense to be recorded as operating expenses of $0.4 million. Excluding the adoption of this standard, 2019 adjusted EBITDA was $7.9 million or 8.7% of net sales.
First Quarter Results
Net sales increased 8.2% to $91.3 million for the first quarter of 2019 compared to $84.4 million in the first quarter of 2018. Sales were positively impacted by a 4.4% improvement in the Lawson segment sales rep productivity compared to the first quarter of 2018. A 10.5% improvement in Bolt Supply sales spread across multiple product categories and the inclusion of Screw Products sales of $0.8 million, which was acquired in the fourth quarter of 2018, also contributed to the increase. Average daily sales grew to $1.450 million compared to $1.341 million in the prior year quarter with 63 selling days in both quarters.
Gross profit increased $2.7 million to $48.9 million compared to $46.2 million in the first quarter of 2018, primarily due to increased sales. Consolidated gross profit as a percentage of sales was 53.6% for the first quarter of 2019 compared to 54.7% in the first quarter of 2018. A higher allocation of service-related costs and lower gross margin profiles on both the Bolt Supply and Screw Products businesses drove the lower consolidated percentage. The organic Lawson MRO segment gross margin as a percent of sales was 60.8% in the first quarter 2019 compared to 60.6% a year ago before giving effect to the allocated service costs.
The Company continues to manage its overall cost structure. Selling expenses decreased to $21.7 million in the first quarter compared to $21.9 million a year ago quarter. As a percentage of sales, selling expenses decreased to 23.8% from 26.0% of sales in the year-ago quarter primarily due to fixed selling costs leveraged over a higher sales base and higher service related expenses classified within gross margin.
General and administrative expenses decreased to $21.6 million in the first quarter of 2019 compared to $22.4 million in the year-ago quarter and decreased as a percent to sales evidencing the Company’s ability to leverage its fixed costs. The decrease in general and administrative expense was primarily driven by lower stock-based compensation and severance expense. Excluding stock-based compensation and severance expense, general and administrative expenses grew 1.7%.
Operating income in the first quarter of 2019 was $5.5 million compared to income of $1.8 million a year ago. The growth in operating income from a year ago was primarily generated by an improvement of $2.7 million in the Lawson MRO segment. Adjusted non-GAAP operating income increased to $6.0 million in the first quarter of 2019 compared to $3.4 million in the year-ago quarter.
Net income for the first quarter of 2019 was $4.1 million, or $0.44 per diluted share compared to net income of $1.2 million, or $0.13 per diluted share, for the same period a year ago. Adjusted net income, excluding stock-based compensation and severance, was $4.5 million or $0.48 per diluted share compared to $0.25 a year ago.Tagged with earnings, financial results, lawson products