Lawson Products Reports First Quarter 2013 Results

  Lawson Products Reports First Quarter 2013 Results

Business Wire

CHICAGO -- April 25, 2013

Lawson Products, Inc. (NASDAQ:LAWS) (“Lawson” or the "Company"), a distributor
of products and services to the MRO marketplace, today announced results for
the first quarter ended March31, 2013.

Financial Highlights

  *Average daily sales increased 2.2% over the fourth quarter of 2012.
  *Sales productivity improved 8.8% from a year ago and 3.2% compared to the
    fourth quarter of 2012 as measured by average sales per representative per
    day.
  *Adjusted non-GAAP operating income was $2.4 million, an improvement of
    $2.9 million over a year ago and $0.4 million improvement from the fourth
    quarter of 2012.

Michael DeCata, president and chief executive officer, commented, “We
continued to sharpen our focus on growing sales during the first quarter. An
important element of that refocusing was the transition of our U.S. sales
force from independent agents to employees, which became effective on January
1, 2013. We are encouraged by the improvement in sales productivity that has
begun to appear in our results. We believe this transition, along with other
initiatives, including our enhanced website and the opening of our new McCook
distribution center, will support additional sales growth.”

First Quarter Results

Net sales for the first quarter of 2013 decreased 5.2% to $72.0 million versus
$76.0 million for the first quarter of 2012. The decrease was mainly driven by
reduced sales coverage due to an 11% decline in the average number of sales
representatives in the first quarter of 2013 compared to the prior year
period. The decrease was partially offset by an improvement in sales force
productivity of 8.8% from a year ago. Lower government sales and one less
selling day in the 2013 quarter also negatively impacted sales. Average daily
sales declined 3.7% to $1.143 million in the first quarter of 2013 from $1.187
million in the first quarter of 2012; however, average daily sales increased
2.2% sequentially from the fourth quarter of 2012.

Gross profit for the first quarter of 2013 was $41.0 million and increased as
a percent of sales to 56.9% from 54.4% a year-ago. The increase was primarily
due to improved freight recoveries compared to the prior year quarter and
better than anticipated proceeds from the liquidation of discontinued
products.

Selling, general and administrative expenses (“SG&A”) included a $1.2 million
expense for the Company's national sales meeting, an increase of $1.4 million
in stock based compensation and an increase of $0.5 million in payroll-related
taxes primarily as a result of moving Lawson's U.S. independent agents to
employee status effective January 1, 2013. Excluding these expenses, SG&A
declined $3.2 million from the prior year quarter, primarily within
compensation, consulting, travel and other expenses. Total SG&A expenses were
$43.9 million for the quarter compared to $44.0 million a year ago.

Excluding the cost of the national sales meeting, stock based compensation and
payroll-related taxes, adjusted non-GAAP operating income was $2.4 million for
the first quarter of 2013 (See reconciliation in Table 1). This represents an
increase of $2.9 million from an adjusted non-GAAP operating loss of $0.5
million in the prior year period and an increase of $0.4 million from adjusted
non-GAAP income of $2.0 million in the fourth quarter of 2012. Operating loss
for the first quarter of 2013 was $2.9 million compared to a loss of $2.8
million in the first quarter of 2012.

Net loss for the first quarter of 2013 was $3.2 million, or $0.37 per diluted
share, compared to a net loss of $1.8 million, or $0.21 per diluted share, in
the prior year period. Excluding the national sales meeting and the stock
based compensation expense, net loss per diluted share was $0.05 for the first
quarter of 2013 (See reconciliation in Table 2).

Corporate Highlights

  *The Company completed its transition from an independent agent model to an
    employee sales team in the United States and continued to increase its
    emphasis on productivity per sales representative. Upon completion of the
    transition, Lawson entered 2013 with 757 sales representatives. During
    2013, Lawson intends to expand the number of sales areas covered and
    improve the penetration of sales in existing territories.
  *Lawson launched its new e-commerce websites www.lawsonproducts.com and
    www.kent-automotive.com. These websites enable new and existing customers
    to perform product searches easily, obtain pricing and place orders
    directly via the Internet. These websites have been designed to improve
    cross-selling and up-selling activity, as well as enhance Lawson's
    visibility to customers when its sales team is not on-site with the
    customer.
  *The Company conducted its first national sales meeting in six years. The
    meeting included training, a supplier trade show and updates on the
    Company's strategy. The event also provided the sales representatives an
    opportunity to network and share best practices.
  *The Company is on schedule to complete the transition of the operations
    currently performed at its Addison, Illinois distribution center to its
    new packaging and distribution center in McCook, Illinois in the first
    half of 2013. As the McCook facility becomes fully operational, the
    Company believes it will begin to realize further efficiencies in its
    operations and enhance customer service through reductions in order
    delivery times and increased order fulfillment rates to support sales
    growth.

“In 2013, we will focus on increasing sales through a combination of adding
sales representatives in under-served areas and improving sales productivity.
We will also continue to improve our operational efficiency and leverage past
investments made in our infrastructure. Lawson is well positioned for the
future and we are confident in our ability to grow sales and improve our
operating performance while better serving our customers,” concluded Mr.
DeCata.

Conference Call

Lawson Products, Inc. will conduct a conference call with investors to discuss
the first quarter 2013 results at 9:00 a.m. EDT on April25, 2013. The
conference call is available by direct dial at 877-317-6789 in the U.S. or
412-317-6789 from outside of the U.S. A replay of the conference call will be
available approximately one hour after completion of the call through May 9,
2013. Callers can access the replay by dialing 877-344-7529 in the U.S. or
412-317-0088 outside the U.S. The PIN access number for the replay is
10016326#. A streaming audio of the call and an archived replay will also be
available on the investor relations page of Lawson's website through May 9,
2013.

About Lawson Products, Inc.

Founded in 1952, Lawson Products, Inc. (NASDAQ: LAWS) is an industrial
distributor of more than 450,000 different maintenance and repair supplies.
Lawson Products serves its customers through a dedicated team of sales
representatives and employees. The Company services the industrial,
institutional, commercial and government markets in all 50 U.S. states,
District of Columbia, Canada and Puerto Rico. You can learn more about the
Company on its website at www.lawsonproducts.com.

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
December31, 2012, Form 10-K filed on February 25, 2013. The Company
undertakes no obligation to update any such factor or to publicly announce the
results of any revisions to any forward-looking statements whether as a result
of new information, future events or otherwise.

                               -TABLES FOLLOW-

                                               
Lawson Products, Inc.
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
                                                  
                                                  Three Months Ended March 31,
                                                  2013            2012
                                                                   
Net sales                                         $  71,995        $  75,962
Cost of goods sold                                31,001          34,628    
Gross profit                                      40,994           41,334
                                                                   
Operating expenses:
Selling, general and administrative expenses      43,857           43,982
Severance expenses                                —               185       
                                                  43,857           44,167
                                                                  
Operating loss                                    (2,863     )     (2,833    )
                                                                   
Interest expense                                  (213       )     (82       )
Other expenses, net                               (61        )     (7        )
                                                                   
Loss from continuing operations before income     (3,137     )     (2,922    )
taxes
                                                                   
Income tax expense (benefit)                      57              (1,137    )
                                                                   
Loss from continuing operations                   (3,194     )     (1,785    )
                                                                   
Discontinued operations, net of income taxes      (29        )     (13       )
                                                                   
Net loss                                          $  (3,223  )     $  (1,798 )
                                                                   
Basic and diluted loss per share of common
stock:
Continuing operations                             $  (0.37   )     $  (0.21  )
Discontinued operations                           —               —         
Net loss per share                                $  (0.37   )     $  (0.21  )
                                                                   
Basic weighted average shares outstanding         8,606            8,574
Dilutive effect of stock based compensation       —               —         
Diluted weighted average shares outstanding       8,606           8,574     
                                                                   
Cash dividends declared per share of common       $  —            $  0.12   
stock
                                                                             

                                                              
Lawson Products, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except per share data)
                                                                  
                                                    March 31,     December 31,
                                                    2013          2012
                                                    (unaudited)
ASSETS
Current assets:
Cash and cash equivalents                           $ 1,335       $   1,640
Accounts receivable, less allowance for             36,063        31,387
doubtful accounts
Inventories                                         54,526        51,484
Miscellaneous receivables and prepaid expenses      6,350         5,451
Deferred income taxes                               17            17
Discontinued operations                             342          350
                                                                  
Total current assets                                98,633        90,329
                                                                  
Property, plant and equipment, net                  66,425        67,155
                                                                  
Cash value of life insurance                        12,701        14,943
Deferred income taxes                               55            55
Other assets                                        458          449
                                                                  
Total assets                                        $ 178,272    $   172,931
                                                                  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                                                                  
Current liabilities:
Revolving line of credit                            $ 19,842      $   16,127
Accounts payable                                    16,364        11,833
Accrued expenses and other liabilities              33,898        31,762
Discontinued operations                             106          106
                                                                  
Total current liabilities                           70,210       59,828
                                                                  
Security bonus plan                                 17,224        18,837
Deferred compensation                               5,779         5,868
Financing lease obligation                          10,789        10,786
Deferred rent liability                             4,780         4,621
Other liabilities                                   1,882        2,258
                                                    40,454       42,370
                                                                  
Total Stockholders’ equity                          67,608       70,733
                                                                  
Total liabilities and stockholders’ equity          $ 178,272    $   172,931
                                                                      
                                                                      

                            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, seasonal
or non-operational items that impact the overall comparability. See the two
tables below for supplemental financial data and corresponding reconciliations
to GAAP financial measures for the three months ended March 31, 2013, December
31, 2012 and March 31, 2012. Non-GAAP financial measures should be viewed in
addition to, and not as an alternative for, the Company's reported results
prepared in accordance with GAAP.


TABLE 1 - RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP OPERATING INCOME (LOSS)
(Amounts in thousands)
(Unaudited)
                              Three Months Ended
                                March 31, 2013  December 31,  March 31, 2012
                                                 2012
                                                                
Operating income (loss),        $   (2,863  )    $  2,471       $   (2,833  )
as reported per GAAP
                                                                
Severance (benefit)             —                (159      )    185
expense
Gain on sale of assets          —                (1,588    )    —
^(1)
Stock based compensation        1,596            434            198
^ (2)
Payroll-related taxes           2,429            842            1,943
^(3)
National sales meeting          1,225           —             —           
                                                                
Adjusted non-GAAP               $   2,387       $  2,000      $   (507    )
operating income (loss)

     
(1)     Gain on the sale of the Des Plaines, Illinois headquarters and
        packaging facility
(2)     Expense for stock based compensation of which a portion varies with
        the Company's stock price
(3)     Includes employer related payroll taxes for which the majority is
        incurred in the first two quarters


TABLE 2 - RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP NET LOSS PER DILUTED
SHARE
(Unaudited)
                                            
                                                   Three Months Ended

                                                   March 31, 2013
                                                   
Net loss per diluted share, as                     $        (0.37       )
reported per GAAP
                                                   
Stock based compensation ^ (1)                     0.18
National sales meeting                             0.14                 
                                                   
Adjusted non-GAAP net loss per                     $        (0.05       )
diluted share
                                                                        
(1) Expense for stock based compensation of which a portion varies with the
Company's stock price



LAWSON PRODUCTS, INC.
TABLE 3 - QUARTERLY RESULTS
                  
                       (Dollars in thousands)
                       Three Months Ended
                       Mar. 31,        Dec. 31,      Sep. 30,      Jun. 30,         Mar. 31,
                       2013              2012            2012            2012               2012
                                                                                            
Number of              63                61              63              64                 64
business days
                                                                                            
Average daily          $ 1,143           $ 1,118         $ 1,143         $ 1,162            $ 1,187
net sales
Sequential
quarter                2.2      %        (2.2     )%     (1.6     )%     (2.1      )%       (2.3     )%
increase
(decrease)
                                                                                            
Average active
sales rep.             762      ^(1)     769             773             807                861
count
                                                                                            
Sales per rep.         $ 1.500           $ 1.454         $ 1.478         $ 1.440            $ 1.379
per day
Sequential
quarter                3.2      %        (1.6     )%     2.7      %      4.4       %        1.3      %
increase
(decrease)
                                                                                            
Net sales              $ 71,995          $ 68,193        $ 71,984        $ 74,348           $ 75,962
Gross profit           40,994            39,672          43,360          36,816    ^(2)     41,334
                                                                                            
Gross profit           56.9     %        58.2     %      60.2     %      49.5      %        54.4     %
percentage
                                                                                            
Operating
expenses
Selling,
general &              43,857            38,948          43,311          45,484             43,982
administrative
expenses
Severance
(benefit)              —                 (159     )      1,410           6,585              185
expense
Gain on sale           —                 (1,588   )      (11      )      (2,122    )        —
of assets
Goodwill               —                —              —              28,306            —        
impairment
                       43,857           37,201         44,710         78,253            44,167   
                                                                                            
Operating              $ (2,863 )        $ 2,471        $ (1,350 )      $ (41,437 )        $ (2,833 )
income (loss)
                                                                                                     

        Following the transition of the U.S. independent agents to employee
(1)   status, the Company began January 1, 2013 with 757 sales
        representatives
(2)     Gross profit for the three months ended June 30, 2012 includes a $3.9
        million charge for discontinuing certain stocked products

Contact:

Investor Relations:
Lawson Products, Inc.
Ronald J. Knutson
Executive Vice President and Chief Financial Officer
773-304-5665