Cover
Cover - shares | 9 Months Ended | ||||||||
Sep. 30, 2020 | Oct. 15, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | |
Cover [Abstract] | |||||||||
Entity Registrant Name | LAWSON PRODUCTS, INC. | ||||||||
Entity Central Index Key | 0000703604 | ||||||||
Document Type | 10-Q | ||||||||
Document Period End Date | Sep. 30, 2020 | ||||||||
Amendment Flag | false | ||||||||
Document Fiscal Year Focus | 2020 | ||||||||
Document Fiscal Period Focus | Q3 | ||||||||
Current Fiscal Year End Date | --12-31 | ||||||||
Entity Filer Category | Accelerated Filer | ||||||||
Entity Small Business | true | ||||||||
Entity Current Reporting Status | Yes | ||||||||
Entity Emerging Growth Company | false | ||||||||
Entity Shell Company | false | ||||||||
Common Stock, Shares, Outstanding | 9,025,617 | 9,007,411 | 8,996,267 | 9,043,771 | 8,956,981 | 8,983,162 | 8,962,450 | 8,955,930 | |
Entity Address, Address Line One | 8770 W. Bryn Mawr Avenue, Suite 900, | ||||||||
Entity Address, City or Town | Chicago, | ||||||||
Document Quarterly Report | true | ||||||||
Document Transition Report | false | ||||||||
Entity File Number | 0-10546 | ||||||||
Entity Tax Identification Number | 36-2229304 | ||||||||
Entity Address, State or Province | IL | ||||||||
Entity Incorporation, State or Country Code | DE | ||||||||
City Area Code | (773) | ||||||||
Local Phone Number | 304-5050 | ||||||||
Title of 12(b) Security | Common stock, $1.00 par value | ||||||||
Trading Symbol | LAWS | ||||||||
Security Exchange Name | NASDAQ | ||||||||
Entity Interactive Data Current | Yes | ||||||||
Entity Common Stock, Shares Outstanding | 9,030,327 | ||||||||
Entity Address, Postal Zip Code | 60631 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 17,193 | $ 5,495 |
Restricted cash | 802 | 802 |
Accounts receivable, less allowance for doubtful accounts of $680 and $593, respectively | 47,902 | 38,843 |
Inventories, net | 62,218 | 55,905 |
Miscellaneous receivables and prepaid expenses | 5,943 | 5,377 |
Total current assets | 134,058 | 106,422 |
Property, plant and equipment, net | 16,596 | 16,546 |
Deferred income taxes | 20,289 | 21,711 |
Goodwill | 36,428 | 20,923 |
Cash value of life insurance | 15,400 | 14,969 |
Intangible assets, net | 18,727 | 12,335 |
Right of use assets | 9,513 | 11,246 |
Other assets | 258 | 277 |
Total assets | 251,269 | 204,429 |
Current liabilities: | ||
Accrued acquisition liability | 32,476 | 0 |
Accounts payable | 22,466 | 13,789 |
Lease obligation | 4,509 | 3,830 |
Accrued expenses and other liabilities | 30,808 | 39,311 |
Total current liabilities | 90,259 | 56,930 |
Revolving line of credit | 0 | 2,271 |
Security bonus plan | 11,540 | 11,840 |
Deferred compensation | 9,847 | 6,370 |
Lease obligation | 6,693 | 9,504 |
Deferred tax liability | 6,154 | 6,188 |
Other liabilities | 5,522 | 3,325 |
Total liabilities | 130,015 | 96,428 |
Stockholders' equity: | ||
Authorized - 500,000 shares, Issued and outstanding — None | 0 | 0 |
Common stock, $1 par value: | 9,232 | 9,190 |
Capital in excess of par value | 19,508 | 18,077 |
Retained earnings | $ 101,386 | $ 86,496 |
Treasury stock, shares | 205,981 | 146,400 |
Treasury stock – 205,981 and 146,400 shares, respectively | $ (7,953) | $ (5,761) |
Accumulated other comprehensive loss | (919) | (1) |
Total stockholders’ equity | 121,254 | 108,001 |
Total liabilities and stockholders’ equity | $ 251,269 | $ 204,429 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 680 | $ 593 |
Preferred stock, par value | $ 1 | $ 1 |
Preferred stock, shares authorized | 500,000 | 500,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 1 | $ 1 |
Common stock, shares authorized | 35,000,000 | 35,000,000 |
Common stock, shares issued | 9,231,598 | 9,190,171 |
Common stock, shares outstanding | 9,025,617 | 9,043,771 |
Treasury stock, shares | 205,981 | 146,400 |
Consolidated Statements of Inco
Consolidated Statements of Income and Comprehensive Income - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Statement [Abstract] | ||||
Total revenue | $ 90,277 | $ 94,779 | $ 253,458 | $ 282,219 |
Cost of goods sold | 43,052 | 44,205 | 118,999 | 131,679 |
Gross profit | 47,225 | 50,574 | 134,459 | 150,540 |
Operating expenses: | ||||
Selling expenses | 19,155 | 21,255 | 55,445 | 64,864 |
General and administrative expenses | 26,069 | 22,873 | 57,806 | 72,063 |
Operating expenses | 45,224 | 44,128 | 113,251 | 136,927 |
Operating income | 2,001 | 6,446 | 21,208 | 13,613 |
Interest expense | (142) | (138) | (329) | (481) |
Other income (expense), net | (615) | 13 | (15) | (798) |
Income before income taxes | 2,474 | 6,295 | 20,894 | 13,930 |
Income tax expense | 736 | 1,521 | 6,004 | 3,703 |
Net income | $ 1,738 | $ 4,774 | $ 14,890 | $ 10,227 |
Basic income per share of common stock | $ 0.19 | $ 0.53 | $ 1.65 | $ 1.14 |
Diluted income per share of common stock | $ 0.19 | $ 0.51 | $ 1.60 | $ 1.09 |
Weighted average shares outstanding: | ||||
Basic weighted average shares outstanding | 9,017 | 8,974 | 9,017 | 8,971 |
Effect of dilutive securities outstanding | 313 | 415 | 312 | 399 |
Diluted weighted average shares outstanding | 9,330 | 9,389 | 9,329 | 9,370 |
Comprehensive income: | ||||
Net income | $ 1,738 | $ 4,774 | $ 14,890 | $ 10,227 |
Adjustment for foreign currency translation | 398 | (427) | (918) | 965 |
Net comprehensive income | $ 2,136 | $ 4,347 | $ 13,972 | $ 11,192 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($) | Total | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Treasury Stock, Common [Member] | Accumulated Foreign Currency Adjustment Attributable to Parent [Member] | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Common Stock, Shares, Outstanding | 8,955,930 | ||||||
Common Stock Outstanding, $1 Par Value | $ 9,006,000 | ||||||
Capital in Excess of Par Value | 15,623,000 | ||||||
Retained Earnings | 77,338,000 | ||||||
Treasury Stock | (1,234,000) | ||||||
Accumulated Other Comprehensive Income (Loss) | (1,560,000) | ||||||
Total Stockholders' Equity | 99,173,000 | ||||||
Net income | 4,146,000 | $ 4,146,000 | |||||
Adjustment for foreign currency translation | 675,000 | $ 675,000 | |||||
Stock-based compensation | $ 666,000 | $ 666,000 | |||||
Shares issued (in shares) | 6,520 | ||||||
Shares issued | $ 0 | $ 6,000 | (6,000) | ||||
Net income | 10,227,000 | ||||||
Adjustment for foreign currency translation | $ 965,000 | ||||||
Common Stock, Shares, Outstanding | 8,962,450 | ||||||
Common Stock Outstanding, $1 Par Value | $ 9,012,000 | ||||||
Capital in Excess of Par Value | 16,283,000 | ||||||
Retained Earnings | 83,421,000 | ||||||
Treasury Stock | (1,234,000) | ||||||
Accumulated Other Comprehensive Income (Loss) | (885,000) | ||||||
Total Stockholders' Equity | 106,597,000 | ||||||
Change in accounting principle | [1] | 1,937,000 | 1,937,000 | ||||
Net income | 1,307,000 | 1,307,000 | |||||
Adjustment for foreign currency translation | 717,000 | 717,000 | |||||
Stock-based compensation | $ 711,000 | 711,000 | |||||
Shares issued (in shares) | 20,712 | ||||||
Shares issued | $ 0 | 21,000 | (21,000) | ||||
Common Stock, Shares, Outstanding | 8,983,162 | ||||||
Common Stock Outstanding, $1 Par Value | $ 9,033,000 | ||||||
Capital in Excess of Par Value | 16,973,000 | ||||||
Retained Earnings | 84,728,000 | ||||||
Treasury Stock | (1,234,000) | ||||||
Accumulated Other Comprehensive Income (Loss) | (168,000) | ||||||
Total Stockholders' Equity | 109,332,000 | ||||||
Net income | $ 4,774,000 | 4,774,000 | |||||
Treasury shares repurchased (in shares) | (35,830) | ||||||
Treasury shares repurchased | $ (1,361,000) | ||||||
Adjustment for foreign currency translation | (427,000) | (427,000) | |||||
Stock-based compensation | $ 663,000 | 663,000 | |||||
Shares issued (in shares) | 9,649 | ||||||
Shares issued | $ 0 | 10,000 | (10,000) | ||||
Common Stock, Shares, Outstanding | 8,956,981 | ||||||
Common Stock Outstanding, $1 Par Value | $ 9,043,000 | ||||||
Capital in Excess of Par Value | 17,626,000 | ||||||
Retained Earnings | 89,502,000 | ||||||
Treasury Stock | (2,595,000) | ||||||
Accumulated Other Comprehensive Income (Loss) | (595,000) | ||||||
Total Stockholders' Equity | $ 112,981,000 | ||||||
Common Stock, Shares, Outstanding | 9,043,771 | ||||||
Common Stock Outstanding, $1 Par Value | $ 9,190,000 | ||||||
Capital in Excess of Par Value | 18,077,000 | ||||||
Retained Earnings | 86,496,000 | ||||||
Treasury Stock | (5,761,000) | ||||||
Accumulated Other Comprehensive Income (Loss) | (1,000) | ||||||
Total Stockholders' Equity | 108,001,000 | ||||||
Net income | $ 12,533,000 | 12,533,000 | |||||
Treasury shares repurchased (in shares) | (47,504) | ||||||
Treasury shares repurchased | $ (1,756,000) | $ (1,756,000) | |||||
Adjustment for foreign currency translation | (2,494,000) | (2,494,000) | |||||
Stock-based compensation | 451,000 | 451,000 | |||||
Net income | $ 14,890,000 | ||||||
Treasury shares repurchased (in shares) | (47,504) | ||||||
Adjustment for foreign currency translation | $ (918,000) | ||||||
Common Stock, Shares, Outstanding | 8,996,267 | ||||||
Common Stock Outstanding, $1 Par Value | $ 9,190,000 | ||||||
Capital in Excess of Par Value | 18,528,000 | ||||||
Retained Earnings | 99,029,000 | ||||||
Treasury Stock | (7,517,000) | ||||||
Accumulated Other Comprehensive Income (Loss) | (2,495,000) | ||||||
Total Stockholders' Equity | 116,735,000 | ||||||
Net income | 619,000 | 619,000 | |||||
Adjustment for foreign currency translation | 1,178,000 | 1,178,000 | |||||
Stock-based compensation | $ 498,000 | 498,000 | |||||
Shares issued (in shares) | 11,144 | ||||||
Shares issued | $ 14,000 | 11,000 | 3,000 | ||||
Common Stock, Shares, Outstanding | 9,007,411 | ||||||
Common Stock Outstanding, $1 Par Value | $ 9,201,000 | ||||||
Capital in Excess of Par Value | 19,029,000 | ||||||
Retained Earnings | 99,648,000 | ||||||
Treasury Stock | (7,517,000) | ||||||
Accumulated Other Comprehensive Income (Loss) | (1,317,000) | ||||||
Total Stockholders' Equity | 119,044,000 | ||||||
Net income | $ 1,738,000 | $ 1,738,000 | |||||
Treasury shares repurchased (in shares) | (12,077) | ||||||
Treasury shares repurchased | $ (436,000) | ||||||
Adjustment for foreign currency translation | 398,000 | $ 398,000 | |||||
Stock-based compensation | $ 510,000 | 510,000 | |||||
Shares issued (in shares) | 30,283 | ||||||
Shares issued | $ 0 | $ 31,000 | $ (31,000) | ||||
Common Stock, Shares, Outstanding | 9,025,617 | ||||||
Common Stock Outstanding, $1 Par Value | $ 9,232,000 | ||||||
Capital in Excess of Par Value | 19,508,000 | ||||||
Retained Earnings | 101,386,000 | ||||||
Treasury Stock | (7,953,000) | ||||||
Accumulated Other Comprehensive Income (Loss) | (919,000) | ||||||
Total Stockholders' Equity | $ 121,254,000 | ||||||
[1] | The Company adopted the ASC No.842, Leases (ASC 842) on January 1, 2019 using the modified retrospective approach. See Note 7 - Leases for further details. |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Operating activities: | ||
Net income | $ 14,890 | $ 10,227 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 4,660 | 4,401 |
Stock-based compensation | (2,767) | 7,621 |
Deferred income taxes | 1,454 | 3,252 |
Changes in operating assets and liabilities, net of acquisition | ||
Accounts receivable | (2,128) | (7,785) |
Inventories | 1,101 | (1,593) |
Prepaid expenses and other assets | (725) | (2,433) |
Accounts payable and other liabilities | 3,097 | (6,193) |
Other | 441 | 544 |
Net cash provided by operating activities | 20,023 | 8,041 |
Investing activities: | ||
Purchases of property, plant and equipment | (1,311) | (1,392) |
Payments to Acquire Businesses, Net of Cash Acquired | (2,300) | 0 |
Net cash used in investing activities | (3,611) | (1,392) |
Financing activities: | ||
Net payments on revolving line of credit | (2,271) | (8,628) |
Repurchase treasury shares | (2,192) | (1,361) |
Payment of financing lease principal | (192) | (192) |
Proceeds from stock option exercises | 15 | 16 |
Net cash used in financing activities | (4,640) | (10,165) |
Effect of exchange rate changes on cash and cash equivalents | (74) | 259 |
Increase (decrease) in cash, cash equivalents and restricted cash | 11,698 | (3,257) |
Cash, cash equivalents and restricted cash at beginning of period | 6,297 | 12,683 |
Cash, cash equivalents and restricted cash at end of period | 17,995 | 9,426 |
Cash, cash equivalents and restricted cash | 17,995 | 9,426 |
Supplemental disclosure of cash flow information | ||
Net cash paid for income taxes | 3,733 | 458 |
Net cash paid for interest | $ 295 | $ 499 |
Basis of Presentation and Summa
Basis of Presentation and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Summary of Significant Accounting Policies | Basis of Presentation and Summary of Significant Accounting PoliciesThe accompanying unaudited condensed consolidated financial statements of Lawson Products, Inc. (the “Company”) have been prepared in accordance with generally accepted accounting principles for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not contain all disclosures required by generally accepted accounting principles. Reference should be made to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. In the opinion of the Company, all normal recurring adjustments have been made that are necessary to present fairly the results of operations for the interim periods. Operating results for the three and nine month periods ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The Company has two operating segments. The first segment, the Lawson operating segment, distributes maintenance, repair and operations ("MRO") products to customers primarily through a network of sales representatives offering vendor managed inventory ("VMI") service to customers throughout the United States and Canada. The second segment, The Bolt Supply House Ltd. ("Bolt Supply") operating segment, distributes MRO products primarily through its branches located in Western Canada. Bolt Supply had 14 branches in operation at the end of the third quarter 2020. |
Acquisition
Acquisition | 9 Months Ended |
Sep. 30, 2020 | |
Business Combinations [Abstract] | |
Acquisition | Acquisition On August 31, 2020, the Company acquired Partsmaster from NCH Corporation. Partsmaster is a leading maintenance, MRO solutions provider that serves approximately 16,000 customers with over 200 sales representatives. The acquisition was made primarily to expand the Company's sales coverage, expand product lines, add experienced sales representatives, and leverage the Company's infrastructure. The purchase price was $35.3 million in cash and the assumption of certain liabilities. The Company paid $2.3 million of the purchase price in cash at closing and will pay the remaining $33.0 million in May 2021. The payment obligation has been discounted to present value and is recognized as an accrued acquisition liability of $32.5 million in the Company's condensed consolidated balance sheet. P ayment has been guaranteed under the Purchase Agreement, and includes the issuance of a $33.0 million irrevocable standby letter of credit. The Company will satisfy the payment obligation with cash on hand and, to the extent necessary, any remaining portion using its existing credit facility. The purchase price of the acquisition was allocated to the fair value of Partsmaster’s assets and liabilities on the acquisition date. The fair market value appraisals of the majority of the assets and liabilities were determined by a third party valuation firm using management estimates and assumptions including intangible assets of $5.0 million for customer relationships and $2.8 million for trade names, and their estimated useful lives of 10 and 5 years, respectively. The $16.0 million allocated to goodwill reflects the purchase price less the fair market value of the identifiable net assets. The appropriate fair values of the assets acquired and liabilities assumed are based on preliminary estimates and assumptions. These preliminary estimates and assumptions could change significantly during the purchase price measurement period as the Company finalizes the valuations of the assets acquired and liabilities assumed. Partsmaster contributed $5.4 million of revenue and $0.4 million of operating income in the third quarter 2020 post-acquisition. A summary of the initial purchase price allocation of the acquisition is as follows (Dollars in thousands): Cash paid and payable and liabilities assumed Cash paid and payable $ 34,711 Accounts payable and accrued expenses 4,076 Deferred compensation 2,938 $ 41,725 Fair value of assets acquired Goodwill $ 15,952 Inventories 7,809 Accounts receivable 7,656 Customer relationships 4,961 Trade names 2,775 Property, plant and equipment 2,201 Other assets 371 $ 41,725 The following table contains unaudited pro forma revenue and net income for Lawson Products assuming the Partsmaster acquisition closed on January 1, 2019. (Dollars in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Revenue Actual $ 90,277 $ 94,779 $ 253,458 $ 282,219 Pro forma 101,222 109,174 298,546 332,234 Net income Actual $ 1,738 $ 4,774 $ 14,890 $ 10,227 Pro forma 1,982 4,598 16,312 10,166 The pro forma disclosures in the table above include adjustments for amortization of intangible assets, implied interest expense and acquisition costs to reflect results as if the acquisition of Partsmaster had closed on January 1, 2019 rather than on the actual acquisition date. This pro forma information utilizes certain estimates, is presented for illustrative purposes only and is not intended to be indicative of the actual results of operation. In addition, future results may vary significantly from the results reflected in the pro forma information. The unaudited pro forma financial information does not reflect the impact of future positive or negative events that may occur after the acquisition, such as anticipated cost savings from operating synergies. |
Revenue Recognition
Revenue Recognition | 9 Months Ended |
Sep. 30, 2020 | |
Deferred Revenue Disclosure [Abstract] | |
Revenue Recognition | Revenue Recognition As part of the Company's revenue recognition analysis, it concluded that it has two separate performance obligations, and accordingly, two separate revenue streams: products and services. Under the definition of a contract as defined by ASC 606, the Company considers contracts to be created at the time an order to purchase product is agreed upon regardless of whether or not there is a written contract. Performance Obligations Lawson has two operating segments; the Lawson segment and the Bolt Supply segment. The Lawson segment has two distinct performance obligations offered to its customers: a product performance obligation and a service performance obligation. Although the Company has identified that it offers its customers both a product and a service obligation, the customer only receives one invoice per transaction with no price breakout between these obligations. The Company does not price its offerings based on any breakout between these obligations. The Lawson segment, including the recent Partsmaster acquisition, offers a vendor managed inventory ("VMI") service proposition to its customers. A portion of these services, primarily related to stocking of product and maintenance of the MRO inventory, is provided a short period of time after control of the purchased product has been transferred to the customer. Since some components of VMI service have not been provided at the time the control of the product transfers to the customer, that portion of expected consideration is deferred until the time that those services have been provided. The Bolt Supply segment does not provide VMI services for its customers or provide services in addition to product sales to customers. In previous financial statements, the Company presented the disaggregated components of total revenue: product revenue and service revenue, along with the cost of sales associated with each of these revenue streams as the service revenues exceeded 10% of consolidated sales. Since the Company qualifies as a smaller reporting company, the Company has elected to discontinue disclosure of the disaggregated components of revenue and cost of sales in its c ondensed consolidated statements of income and comprehensive income and in the related notes to the condensed consolidated financial statements. This presentation decision is effective beginning with this Quarterly Report on Form 10-Q for the period ended September 30, 2020. For the three and nine months ended September 30, 2019, service revenue of $10.3 million and $29.9 million, respectively, were reported as service revenue which have now been combined as reported within total revenue. Disaggregated revenue by geographic area follows: Three Months Ended September 30, Nine Months Ended September 30, (Dollars in thousands) 2020 2019 2020 2019 United States $ 72,030 $ 75,160 $ 202,709 $ 225,327 Canada 18,247 19,619 50,749 56,892 Consolidated total $ 90,277 $ 94,779 $ 253,458 $ 282,219 Disaggregated revenue by product type follows: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Fastening Systems 22.3 % 24.1 % 22.7 % 24.0 % Specialty Chemicals 13.3 % 11.7 % 11.7 % 11.6 % Fluid Power 12.6 % 15.1 % 13.2 % 15.2 % Cutting Tools and Abrasives 12.2 % 13.1 % 13.1 % 13.1 % Electrical 10.0 % 10.4 % 10.2 % 10.8 % Safety 7.0 % 4.7 % 6.4 % 4.7 % Aftermarket Automotive Supplies 7.0 % 7.6 % 7.1 % 7.9 % Welding and Metal Repair 1.4 % 1.3 % 1.4 % 1.5 % Other 14.2 % 12.0 % 14.2 % 11.2 % Consolidated Total 100.0% 100.0% 100.0% 100.0% |
Restricted Cash
Restricted Cash | 9 Months Ended |
Sep. 30, 2020 | |
Restricted Cash [Abstract] | |
Restricted Cash | Restricted CashThe Company has agreed to maintain $0.8 million in a money market account as collateral for an outside party that is providing certain commercial card processing services for the Company. The Company is restricted from withdrawing this balance without the prior consent of the outside party during the term of the agreement. |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2020 | |
Inventory Disclosure [Abstract] | |
Inventories, Net | Inventories, Net Inventories, net, consisting primarily of purchased goods which are offered for resale, were as follows: (Dollars in thousands) September 30, 2020 December 31, 2019 Inventories, gross $ 67,083 $ 60,500 Reserve for obsolete and excess inventory (4,865) (4,595) Inventories, net $ 62,218 $ 55,905 |
Goodwill Goodwill
Goodwill Goodwill | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | Goodwill Goodwill activity for the first nine months of 2020 and 2019 is included in the table below: (Dollars in thousands) Nine Months Ended September 30, 2020 2019 Beginning balance $ 20,923 $ 20,079 Acquisition 15,952 — Adjustment to original acquisition allocation — (12) Impact of foreign exchange (447) 515 Ending balance $ 36,428 $ 20,582 |
Intangible Assets
Intangible Assets | 9 Months Ended |
Sep. 30, 2020 | |
Intangible Assets [Abstract] | |
Intangible Assets | Intangible Assets The gross carrying amount and accumulated amortization by intangible asset class were as follows: (Dollars in thousands) September 30, 2020 December 31, 2019 Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value Trade names $ 11,022 $ (2,436) $ 8,586 $ 8,422 $ (2,020) $ 6,402 Customer relationships 12,181 (2,040) 10,141 7,337 (1,404) 5,933 $ 23,203 $ (4,476) $ 18,727 $ 15,759 $ (3,424) $ 12,335 Amortization expense of $1.1 million and $1.0 million related to intangible assets was recorded in General and administrative expenses for the nine months ended September 30, 2020 and 2019, respectively. |
Leases
Leases | 9 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
Leases | Leases The Company leases property used for distribution centers, office space, and Bolt branch locations throughout the US and Canada, along with various equipment located in distribution centers and corporate headquarters. The Company is also a lessor of its Decatur, Alabama property previously used in conjunction with a discontinued operation. The expenses and income generated by the leasing activity of Lawson as lessee for the three months ended September 30, 2020 and September 30, 2019 are as follows (Dollars in thousands): Lease Type Classification Three Months Ended September 30, 2020 Three Months Ended September 30, 2019 Consolidated Operating Lease Expense (1) Operating expenses $ 1,262 $ 1,190 Consolidated Financing Lease Amortization Operating expenses 63 $ 60 Consolidated Financing Lease Interest Interest expense 8 10 Consolidated Financing Lease Expense 71 70 Sublease Income (2) Operating expenses — — Net Lease Cost $ 1,333 $ 1,260 (1) Includes short term lease expense, which is immaterial (2) Sublease income from sublease of a portion of the Company headquarters. The sublease was terminated in June 2019 and the Company has no other subleases. The expenses and income generated by the leasing activity of Lawson as lessee for the nine months ended September 30, 2020 and September 30, 2019 are as follows (Dollars in thousands): Lease Type Classification Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019 Consolidated Operating Lease Expense (1) Operating expenses $ 3,630 $ 3,532 Consolidated Financing Lease Amortization Operating expenses 165 159 Consolidated Financing Lease Interest Interest expense 22 23 Consolidated Financing Lease Expense 187 182 Sublease Income (2) Operating expenses — (160) Net Lease Cost $ 3,817 $ 3,554 (1) Includes short term lease expense, which is immaterial (2) Sublease income from sublease of a portion of the Company headquarters. The sublease was terminated in June 2019 and the Company has no other subleases. The value of the net assets and liabilities generated by the leasing activity of Lawson as lessee as of September 30, 2020 and December 31, 2019 are as follows (Dollars in thousands): Lease Type September 30, December 31, Total Right Of Use ("ROU") operating lease assets (1) $ 8,938 $ 10,592 Total ROU financing lease assets (2) 575 654 Total lease assets $ 9,513 $ 11,246 Total current operating lease obligation $ 4,276 $ 3,591 Total current financing lease obligation 233 239 Total current lease obligations $ 4,509 $ 3,830 Total long term operating lease obligation $ 6,414 $ 9,133 Total long term financing lease obligation 279 371 Total long term lease obligation $ 6,693 $ 9,504 (1) Operating lease assets are recorded net of accumulated amortization of $5.1 million and $2.4 million as of September 30, 2020 and December 31, 2019, respectively (2) Financing lease assets are recorded net of accumulated amortization of $0.4 million and $0.2 million as of September 30, 2020 and December 31, 2019, respectively The value of the lease liabilities generated by the leasing activities of Lawson as lessee as of September 30, 2020 were as follows (Dollars in thousands): Maturity Date of Lease Liabilities Operating Leases Financing Leases Total Year one $ 4,599 $ 254 $ 4,853 Year two 3,780 153 3,933 Year three 1,733 101 1,834 Year four 720 35 755 Year five 175 2 177 Subsequent years 471 — 471 Total lease payments 11,478 545 12,023 Less: Interest 788 33 821 Present value of lease liabilities $ 10,690 $ 512 $ 11,202 (1) Minimum lease payments exclude payments to landlord for real estate taxes and common area maintenance $0.7 million The weighted average lease terms and interest rates of the leases held by Lawson as of September 30, 2020 are as follows: Lease Type Weighted Average Term in Years Weighted Average Interest Rate Operating Leases 3.1 5.08% Financing Leases 2.7 5.37% The cash outflows of the leasing activity of Lawson as lessee for the nine months ending September 30, 2020 are as follows (Dollars in thousands): Cash Flow Source Classification Amount Operating cash flows from operating leases Operating activities $ 3,072 Operating cash flows from financing leases Operating activities 22 Financing cash flows from financing leases Financing activities 192 |
Credit Agreement
Credit Agreement | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Credit Agreement | Credit Agreement In the fourth quarter of 2019, the Company entered into a five-year credit agreement led by J.P. Morgan Chase Bank N.A, as administrative agent and including CIBC Bank USA and Bank of America, N.A. as other lenders. The credit agreement matures on October 11, 2024 and provides for $100.0 million of revolving commitments. The credit agreement allows borrowing capacity to increase to $150.0 million subject to meeting certain criteria and additional commitments from its lenders. The Credit Agreement consists of borrowings as alternate base rate loans, Canadian prime rate loans, Eurodollar loans, and Canadian dollar offered rate loans as the Company requests. The applicable interest rate spread is determined by the type of borrowing used and the Total Net Leverage Ratio as of the most recent fiscal quarter as defined in the Credit Agreement. The covenants associated with the Credit Agreement restrict the ability of the Company to, among other things: incur additional indebtedness and liens, make certain investments, merge or consolidate, engage in certain transactions such as the disposition of assets and sales-leaseback transactions, and make certain restricted cash payments such as dividends in excess of defined amounts contained within the Credit Agreement. In addition to these items and other customary terms and conditions, the Credit Agreement requires the Company to comply with certain financial covenants as follows: a) The Company is required to maintain an EBITDA to Fixed Charge Coverage Ratio of at least 1.15 to 1.00 for any period of four consecutive fiscal quarters ending on the last day of any fiscal quarter; and b) The Company is required to maintain a Total Net Leverage Ratio of no more than 3.25 to 1.00 on the last day of any fiscal quarter. The maximum Total Net Leverage Ratio will be allowed to increase to 3.75 to 1.00 after certain permitted acquisitions. The Credit Agreement also includes events of default for, among others, non-payment of obligations under the Credit Agreement, change of control, cross default to other indebtedness in an aggregate amount in excess of $5.0 million, failure to comply with covenants, and insolvency. In addition to other customary representations, warranties and covenants, the results of the financial covenants are provided below: Quarterly Financial Covenants Requirement Actual EBITDA to fixed charges ratio 1.15 : 1.00 4.73 : 1.00 Total net leverage ratio 3.25 : 1.00 0.71 : 1.00 The Company was in compliance with all covenants as of September 30, 2020. During the third quarter of 2020 the Company entered into an amendment to the Credit Agreement which among other items increased the letter of credit basket from $15.0 million to $40.0 million until August 31, 2021 and authorized the Company to incur indebtedness in an amount up to $36.0 million for the acquisition of Partsmaster. |
Stock Repurchase Program
Stock Repurchase Program | 9 Months Ended |
Sep. 30, 2020 | |
Treasury Shares Repurchase [Abstract] | |
Stock Repurchase Program | Stock Repurchase ProgramIn the second quarter of 2019, the Board of Directors authorized a program in which the Company may repurchase up to $7.5 million of the Company's common stock from time to time in open market transactions, privately negotiated transactions or by other methods. In the first quarter of 2020 the Company purchased 47,504 shares of common stock at an average purchase price of $36.93 under the repurchase program. No shares were repurchased in the second or third quarters of 2020 under the Company stock repurchase plan. |
Severance Reserve
Severance Reserve | 9 Months Ended |
Sep. 30, 2020 | |
Severance Reserve [Abstract] | |
Severance Reserve | Severance Reserve Changes in the Company’s reserve for severance as of September 30, 2020 and 2019 were as follows: (Dollars in thousands) Nine Months Ended September 30, 2020 2019 Balance at beginning of period $ 909 $ 359 Charged to earnings 1,520 1,542 Payments (1,239) (925) Balance at end of period $ 1,190 $ 976 |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation The Company recorded stock-based compensation inc ome of $2.8 million and expense of $7.6 million for the first nine months of 2020 and 2019, respectively. A portion of stock-based compensation is related to the change in the market value of the Company's common stock. Stock-based compensation lia bility of $10.4 million as of September 30, 2020 and $14.9 million as of December 31, 2019 is included in Accrued expenses and other liabilities. A summary of stock-based awards issued during the nine months ended September 30, 2020 follows: Restricted Stock Units ("RSUs") The Company i ssued 6,847 RSUs to key employees that cliff vest on December 31, 2022. The Company issued 2,500 RSUs to an executive that cliff vest on March 2, 2023 and 3,000 RSUs that cliff vest on March 9, 2023. The Company issued 10,965 RSUs to certain members of the Company's Board of Directors with a vesting date of May 12, 2021. Each RSU is exchangeable for one share of the Company's common stock at the end of the vesting period. Market Stock Units ("MSUs") The Company issued 22,284 MSUs to key employees that cliff vest on December 31, 2022. MSUs are exchangeable for the Company's common stock at the end of the vesting period. The number of shares of common stock that will be issued upon vesting, ranging from zero to 33,426, will be determined based upon the trailing sixty-day average closing price of the Company's common stock on December 31, 2022. Performance Awards ("PAs") |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company recorded income tax expense of $6.0 million, a 28.7% effective tax rate for the nine months ended September 30, 2020. The effective tax rate is higher than the U.S. statutory tax rate due primarily to state taxes, recording of reserves for uncertain tax positions, and an inclusion for Global Intangible Low Taxed Income. Income tax expense of $3.7 million, a 26.6% effective tax rate was recorded for the nine months ended September 30, 2019. This effective tax rate was higher than the U.S. statutory rate due primarily to state taxes, income in higher tax jurisdictions and an inclusion for Global Intangible Low Tax Income. The Company and its subsidiaries are subject to U.S. Federal income tax, as well as income tax of multiple state and foreign jurisdictions. As of September 30, 2020, the Company is subject to U.S. Federal income tax examinations for the years 2017 through 2019 and income tax examinations from various other jurisdictions for the years 2013 through 2019. |
Contingent Liability
Contingent Liability | 9 Months Ended |
Sep. 30, 2020 | |
Contingent Liability [Abstract] | |
Contingent Liability | Contingent LiabilitiesIn 2012, the Company identified that a site it owns in Decatur, Alabama, contains hazardous substances in the soil and groundwater as a result of historical operations prior to the Company's ownership. The Company retained an environmental consulting firm to further investigate the contamination including the measurement and monitoring of the site and the site was enrolled in the Alabama Department of Environmental Management (“ADEM") voluntary cleanup program. The remediation plan was approved by ADEM in 2018. The plan consists of chemical injections throughout the affected area, as well as subsequent monitoring of the area for three consecutive periods. The injection process was completed in the first quarter of 2019 and the environmental consulting firm is monitoring the affected area. The Company utilized its remaining liability balance in the third quarter of 2020. there may be some additional nominal filing fees that are charged to the Company by the environmental consulting firm and ADEM, however these amounts are expected to be immaterial and will be expensed as incurred. The Company does not expect to capitalize any amounts related to the remediation plan. |
Related Party Disclosures
Related Party Disclosures | 9 Months Ended |
Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transaction | Related Party TransactionDuring the three and nine months ended September 30, 2020 the Company purchased approximately $0.7 million and $0.9 million, respectively, of inventory from a company owned by an immediate relative of a Board member at fair market value. The Company paid substantially all of the amount owed in the third quarter and therefore immaterial remaining liabilities exist as of September 30, 2020. |
Segment Information
Segment Information | 9 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information The Company operates in two reportable segments. The businesses have been determined to be separate reportable segments because of differences in their financial characteristics and the methods they employ to deliver product to customers. The operating segments are reviewed by the Company’s chief operating decision maker responsible for reviewing operating performance and allocating resources. The Lawson segment primarily relies on its large network of sales representatives to visit the customer at the customers' work location and provide VMI service and produce sales orders for product that is then shipped to the customer. Given the nature of the acquired Partsmaster business, it is included in the Lawson segment for reporting purposes. The Bolt Supply segment primarily sells product to customers through its branch locations. Bolt Supply had 14 branches in operation at the end of the third quarter of 2020. Financial information for the Company's reportable segments follows: Three Months Ended Nine Months Ended 2020 2019 2020 2019 Revenue Lawson $ 79,806 $ 83,461 $ 224,511 $ 250,895 Bolt Supply 10,471 11,318 28,947 31,324 Consolidated total $ 90,277 $ 94,779 $ 253,458 $ 282,219 Gross profit Lawson $ 43,038 $ 46,148 $ 123,031 $ 138,524 Bolt Supply 4,187 4,426 11,428 12,016 Consolidated total $ 47,225 $ 50,574 $ 134,459 $ 150,540 Operating income Lawson $ 1,112 $ 5,377 $ 19,003 $ 11,490 Bolt Supply 889 1,069 2,205 2,123 Consolidated total 2,001 6,446 21,208 13,613 Interest expense (142) (138) (329) (481) Other income (expense), net 615 (13) 15 798 Income before income taxes $ 2,474 $ 6,295 $ 20,894 $ 13,930 |
COVID-19 Risks and Uncertaintie
COVID-19 Risks and Uncertainties | 9 Months Ended |
Sep. 30, 2020 | |
Risks and Uncertainties [Abstract] | |
COVID-19 Risks and Uncertainties | COVID-19 Risks and Uncertainties There is substantial uncertainty as to the overall effect the COVID-19 pandemic will have on the results of the Company for 2020 and beyond. Various events related to COVID-19 have resulted in lost revenue to our Company, limitations on our ability to source high demand products, limitations on our sales force to perform certain functions due to state or federal stay-at-home orders, slow-down of customer demand for our products and limitations of some customers to pay us on a timely basis. On March 27, 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security ("CARES") Act to provide certain relief as a result of the COVID-19 outbreak. The Company has elected to defer the employer side social security payments in accordance with the CARES Act. The Company will continue to evaluate how the provisions of the CARES Act will impact its financial position, results of operations and cash flows. The Company has utilized the Canadian Emergency Wage Subsidy ("CEWS") Act for both Lawson Canada and Bolt for assistance with hourly employee costs. The CEWS is a program that provides a subsidy of certain eligible wages commencing March 15, 2020 through December 31, 2020 subject to meeting certain criteria. During the second quarter of 2020 the Company recorded $0.9 million in subsidies from the CEWS program which is recognized as a reduction to selling, general and administrative expenses in the consolidated statement of income and comprehensive income. No subsidies were recognized in the three months ended September 30, 2020. In the first quarter of 2020, the government of the state of Illinois defined essential businesses, allowing Lawson to operate during the pandemic. A change in this status could result in the temporary closure of our business. Additionally the COVID-19 pandemic could result in a temporary closure of any or all of our distribution facilities or the Bolt branch locations, which would negatively impact our operations. Other disruptions to our supply chain such as reduced capacity or temporary shutdowns of freight carriers could also negatively impact Company performance. The pandemic is negatively impacting sales and operations currently and may negatively impact future financial results, liquidity and overall performance of the Company. Additionally, it is reasonably possible that estimates made in the financial statements may be materially and adversely impacted in the near term as a result of these conditions, including delay in payment of receivables, impairment losses related to goodwill and other long-lived assets, and inability to utilize deferred tax assets. The Lawson MRO business model relies upon customer interaction as well as a consistent schedule of onsite visits by our sales representatives to customer locations. The Bolt business model relies on foot traffic in its branch locations. The onset of the COVID-19 pandemic, as well as social distancing guidelines and government mandated shelter in place orders, have negatively impacted the ability of our sales reps to visit our customers and for foot traffic to return to our Bolt branch locations, resulting in an overall negative impact on our business. The second quarter 2020 financial performance of the Company was substantially negatively impacted as state and local governments throughout the United States and Canada imposed strict COVID-19 related restrictions, including shutdowns of nonessential businesses and stay-at-home orders, particularly in April. These restrictions were relaxed in May and June, and were further relaxed throughout the third quarter. The economic climate in the third quarter improved as non-essential businesses reopened in both limited capacity and full capacity. The relaxed restrictions resulted in increased customer contact and more consistent customer visits for Lawson MRO sales representatives, as well as increased customer visits to Bolt branch locations. The improved economic climate and increased activity of the Lawson MRO and Bolt segments led to a sequential improvement in financial results in the third quarter 2020 compared to the second quarter 2020. The Company has taken several steps to mitigate the potential negative impacts of COVID-19. The actions taken included, but are not limited to, furloughing employees, reducing base salaries for a period of time, canceling travel and award trips, temporarily consolidating its Suwanee distribution center operations into the McCook facility, eliminating non-critical capital expenditures and eliminating various positions throughout the Company. In the third quarter the Company brought back approximately 70% of the previously furloughed employees. The Company reopened the Suwanee distribution center in a reduced capacity in the third quarter as overall business activity increased. The Company continues to monitor its balance sheet and liquidity position and is taking actions to protect cash flows from operations, while at the same time managing its operating expenses in relation to current sales trends. At September 30, 2020, the Company had $17.2 million of unrestricted cash and cash equivalents and an additional $66.0 million of borrowing capacity, net of outstanding letters of credit, under its committed credit facility. The Company recorded a liability of $32.5 million in relation to the acquisition of Partsmaster. The Company will continue to closely monitor the operating environment and will take appropriate actions to protect the safety for its employees, customers and suppliers while continuing to meet its working capital needs and remain in compliance with its debt covenants. |
Acquisition (Tables)
Acquisition (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Business Combinations [Abstract] | |
Schedule of Business Acquisitions, by Acquisition | A summary of the initial purchase price allocation of the acquisition is as follows (Dollars in thousands): Cash paid and payable and liabilities assumed Cash paid and payable $ 34,711 Accounts payable and accrued expenses 4,076 Deferred compensation 2,938 $ 41,725 Fair value of assets acquired Goodwill $ 15,952 Inventories 7,809 Accounts receivable 7,656 Customer relationships 4,961 Trade names 2,775 Property, plant and equipment 2,201 Other assets 371 $ 41,725 |
Acquisition Pro Forma Information | The following table contains unaudited pro forma revenue and net income for Lawson Products assuming the Partsmaster acquisition closed on January 1, 2019. (Dollars in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Revenue Actual $ 90,277 $ 94,779 $ 253,458 $ 282,219 Pro forma 101,222 109,174 298,546 332,234 Net income Actual $ 1,738 $ 4,774 $ 14,890 $ 10,227 Pro forma 1,982 4,598 16,312 10,166 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Deferred Revenue Disclosure [Abstract] | |
Disaggregated Revenue by Geographic Areas | Disaggregated revenue by geographic area follows: Three Months Ended September 30, Nine Months Ended September 30, (Dollars in thousands) 2020 2019 2020 2019 United States $ 72,030 $ 75,160 $ 202,709 $ 225,327 Canada 18,247 19,619 50,749 56,892 Consolidated total $ 90,277 $ 94,779 $ 253,458 $ 282,219 |
Disaggregated Revenue by Product Type | Disaggregated revenue by product type follows: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Fastening Systems 22.3 % 24.1 % 22.7 % 24.0 % Specialty Chemicals 13.3 % 11.7 % 11.7 % 11.6 % Fluid Power 12.6 % 15.1 % 13.2 % 15.2 % Cutting Tools and Abrasives 12.2 % 13.1 % 13.1 % 13.1 % Electrical 10.0 % 10.4 % 10.2 % 10.8 % Safety 7.0 % 4.7 % 6.4 % 4.7 % Aftermarket Automotive Supplies 7.0 % 7.6 % 7.1 % 7.9 % Welding and Metal Repair 1.4 % 1.3 % 1.4 % 1.5 % Other 14.2 % 12.0 % 14.2 % 11.2 % Consolidated Total 100.0% 100.0% 100.0% 100.0% |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Inventory Disclosure [Abstract] | |
Components of inventories | Inventories, net, consisting primarily of purchased goods which are offered for resale, were as follows: (Dollars in thousands) September 30, 2020 December 31, 2019 Inventories, gross $ 67,083 $ 60,500 Reserve for obsolete and excess inventory (4,865) (4,595) Inventories, net $ 62,218 $ 55,905 |
Goodwill (Tables)
Goodwill (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | Goodwill activity for the first nine months of 2020 and 2019 is included in the table below: (Dollars in thousands) Nine Months Ended September 30, 2020 2019 Beginning balance $ 20,923 $ 20,079 Acquisition 15,952 — Adjustment to original acquisition allocation — (12) Impact of foreign exchange (447) 515 Ending balance $ 36,428 $ 20,582 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Intangible Assets [Abstract] | |
Intangible Assets Disclosure | The gross carrying amount and accumulated amortization by intangible asset class were as follows: (Dollars in thousands) September 30, 2020 December 31, 2019 Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value Trade names $ 11,022 $ (2,436) $ 8,586 $ 8,422 $ (2,020) $ 6,402 Customer relationships 12,181 (2,040) 10,141 7,337 (1,404) 5,933 $ 23,203 $ (4,476) $ 18,727 $ 15,759 $ (3,424) $ 12,335 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
Net Lease Cost | The expenses and income generated by the leasing activity of Lawson as lessee for the three months ended September 30, 2020 and September 30, 2019 are as follows (Dollars in thousands): Lease Type Classification Three Months Ended September 30, 2020 Three Months Ended September 30, 2019 Consolidated Operating Lease Expense (1) Operating expenses $ 1,262 $ 1,190 Consolidated Financing Lease Amortization Operating expenses 63 $ 60 Consolidated Financing Lease Interest Interest expense 8 10 Consolidated Financing Lease Expense 71 70 Sublease Income (2) Operating expenses — — Net Lease Cost $ 1,333 $ 1,260 (1) Includes short term lease expense, which is immaterial (2) Sublease income from sublease of a portion of the Company headquarters. The sublease was terminated in June 2019 and the Company has no other subleases. |
Operating Lease Assets And Liabilities | The value of the net assets and liabilities generated by the leasing activity of Lawson as lessee as of September 30, 2020 and December 31, 2019 are as follows (Dollars in thousands): Lease Type September 30, December 31, Total Right Of Use ("ROU") operating lease assets (1) $ 8,938 $ 10,592 Total ROU financing lease assets (2) 575 654 Total lease assets $ 9,513 $ 11,246 Total current operating lease obligation $ 4,276 $ 3,591 Total current financing lease obligation 233 239 Total current lease obligations $ 4,509 $ 3,830 Total long term operating lease obligation $ 6,414 $ 9,133 Total long term financing lease obligation 279 371 Total long term lease obligation $ 6,693 $ 9,504 (1) Operating lease assets are recorded net of accumulated amortization of $5.1 million and $2.4 million as of September 30, 2020 and December 31, 2019, respectively (2) Financing lease assets are recorded net of accumulated amortization of $0.4 million and $0.2 million as of September 30, 2020 and December 31, 2019, respectively |
Value of Lease Liabilities Generated by Leasing Activities | The value of the lease liabilities generated by the leasing activities of Lawson as lessee as of September 30, 2020 were as follows (Dollars in thousands): Maturity Date of Lease Liabilities Operating Leases Financing Leases Total Year one $ 4,599 $ 254 $ 4,853 Year two 3,780 153 3,933 Year three 1,733 101 1,834 Year four 720 35 755 Year five 175 2 177 Subsequent years 471 — 471 Total lease payments 11,478 545 12,023 Less: Interest 788 33 821 Present value of lease liabilities $ 10,690 $ 512 $ 11,202 (1) Minimum lease payments exclude payments to landlord for real estate taxes and common area maintenance $0.7 million |
Lease Disclosures | The weighted average lease terms and interest rates of the leases held by Lawson as of September 30, 2020 are as follows: Lease Type Weighted Average Term in Years Weighted Average Interest Rate Operating Leases 3.1 5.08% Financing Leases 2.7 5.37% |
Schedule of Cash Flow, Supplemental Disclosures | The cash outflows of the leasing activity of Lawson as lessee for the nine months ending September 30, 2020 are as follows (Dollars in thousands): Cash Flow Source Classification Amount Operating cash flows from operating leases Operating activities $ 3,072 Operating cash flows from financing leases Operating activities 22 Financing cash flows from financing leases Financing activities 192 |
Credit Agreement (Tables)
Credit Agreement (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Quarterly Financial Covenants | In addition to other customary representations, warranties and covenants, the results of the financial covenants are provided below: Quarterly Financial Covenants Requirement Actual EBITDA to fixed charges ratio 1.15 : 1.00 4.73 : 1.00 Total net leverage ratio 3.25 : 1.00 0.71 : 1.00 |
Severance Reserve (Tables)
Severance Reserve (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Severance Reserve [Abstract] | |
Changes in the Company's reserve for severance and related payments | Changes in the Company’s reserve for severance as of September 30, 2020 and 2019 were as follows: (Dollars in thousands) Nine Months Ended September 30, 2020 2019 Balance at beginning of period $ 909 $ 359 Charged to earnings 1,520 1,542 Payments (1,239) (925) Balance at end of period $ 1,190 $ 976 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information, by Segment | Financial information for the Company's reportable segments follows: Three Months Ended Nine Months Ended 2020 2019 2020 2019 Revenue Lawson $ 79,806 $ 83,461 $ 224,511 $ 250,895 Bolt Supply 10,471 11,318 28,947 31,324 Consolidated total $ 90,277 $ 94,779 $ 253,458 $ 282,219 Gross profit Lawson $ 43,038 $ 46,148 $ 123,031 $ 138,524 Bolt Supply 4,187 4,426 11,428 12,016 Consolidated total $ 47,225 $ 50,574 $ 134,459 $ 150,540 Operating income Lawson $ 1,112 $ 5,377 $ 19,003 $ 11,490 Bolt Supply 889 1,069 2,205 2,123 Consolidated total 2,001 6,446 21,208 13,613 Interest expense (142) (138) (329) (481) Other income (expense), net 615 (13) 15 798 Income before income taxes $ 2,474 $ 6,295 $ 20,894 $ 13,930 |
Basis of Presentation and Sum_2
Basis of Presentation and Summary of Significant Accounting Policies (Details) | 9 Months Ended |
Sep. 30, 2020Segment | |
Accounting Policies [Abstract] | |
Number of Reportable Segments | 2 |
Acquisition - Narrative (Detail
Acquisition - Narrative (Details) customer in Thousands, $ in Thousands | Aug. 31, 2020USD ($)customersale_representative | May 31, 2021USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2020USD ($) | Aug. 30, 2020USD ($) | Jun. 30, 2020USD ($) | Dec. 31, 2019USD ($) | Sep. 30, 2019USD ($) | Dec. 31, 2018USD ($) |
Business Acquisition [Line Items] | |||||||||
Accrued acquisition liability | $ 32,476 | $ 32,476 | $ 0 | ||||||
Letter of credit | $ 36,000 | $ 40,000 | $ 15,000 | ||||||
Goodwill | 36,428 | $ 36,428 | $ 20,923 | $ 20,582 | $ 20,079 | ||||
Minimum Debt Service Coverage Ratio | 1.15 | ||||||||
Partsmaster [Member] | |||||||||
Business Acquisition [Line Items] | |||||||||
Number of customers | customer | 16 | ||||||||
Number of sales representatives | sale_representative | 200 | ||||||||
Purchase price | $ 35,300 | ||||||||
Payments for purchase | 2,300 | ||||||||
Accrued acquisition liability | 32,500 | ||||||||
Letter of credit | 33,000 | ||||||||
Goodwill | 15,952 | ||||||||
Revenue since acquisition | 5,400 | ||||||||
Operating income since acquisition | $ 400 | ||||||||
Partsmaster [Member] | Forecast [Member] | |||||||||
Business Acquisition [Line Items] | |||||||||
Payments for purchase | $ 33,000 | ||||||||
Customer Relationships [Member] | Partsmaster [Member] | |||||||||
Business Acquisition [Line Items] | |||||||||
Intangibles | $ 4,961 | ||||||||
Intangibles weighted average life | 10 years | ||||||||
Trade Names [Member] | Partsmaster [Member] | |||||||||
Business Acquisition [Line Items] | |||||||||
Intangibles | $ 2,775 | ||||||||
Intangibles weighted average life | 5 years |
Acquisition - Initial Purchase
Acquisition - Initial Purchase Price Allocation (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Aug. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Dec. 31, 2018 |
Fair value of assets acquired | |||||
Goodwill | $ 36,428 | $ 20,923 | $ 20,582 | $ 20,079 | |
Partsmaster [Member] | |||||
Cash paid and payable and liabilities assumed | |||||
Cash paid and payable | $ 34,711 | ||||
Accounts payable and accrued expenses | 4,076 | ||||
Deferred compensation | 2,938 | ||||
Cash paid and payable and liabilities assumed | 41,725 | ||||
Fair value of assets acquired | |||||
Goodwill | 15,952 | ||||
Inventories | 7,809 | ||||
Accounts receivable | 7,656 | ||||
Property, plant and equipment | 2,201 | ||||
Other assets | 371 | ||||
Fair value of assets acquired | 41,725 | ||||
Partsmaster [Member] | Customer Relationships [Member] | |||||
Fair value of assets acquired | |||||
Intangibles | 4,961 | ||||
Partsmaster [Member] | Trade Names [Member] | |||||
Fair value of assets acquired | |||||
Intangibles | $ 2,775 |
Acquisition - Pro Forma Informa
Acquisition - Pro Forma Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Revenue | ||||||||
Actual | $ 90,277 | $ 94,779 | $ 253,458 | $ 282,219 | ||||
Net income | ||||||||
Actual | 1,738 | $ 619 | $ 12,533 | 4,774 | $ 1,307 | $ 4,146 | 14,890 | 10,227 |
Partsmaster [Member] | ||||||||
Revenue | ||||||||
Pro forma | 101,222 | 109,174 | 298,546 | 332,234 | ||||
Net income | ||||||||
Pro forma | $ 1,982 | $ 4,598 | $ 16,312 | $ 10,166 |
Revenue Recognition - Narrative
Revenue Recognition - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019 | Sep. 30, 2019 | |
Service [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 10,300 | $ 29,900 |
Revenue Recognition - Schedule
Revenue Recognition - Schedule of Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Disaggregation of Revenue [Line Items] | ||||
Total revenue | $ 90,277 | $ 94,779 | $ 253,458 | $ 282,219 |
United States | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 72,030 | 75,160 | 202,709 | 225,327 |
Canada | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | $ 18,247 | $ 19,619 | $ 50,749 | $ 56,892 |
Revenue Recognition - Product T
Revenue Recognition - Product Type (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Product Revenue [Abstract] | ||||
Fastening Systems | 22.30% | 24.10% | 22.70% | 24.00% |
Fluid Power | 12.60% | 15.10% | 13.20% | 15.20% |
Specialty Chemicals | 12.20% | 13.10% | 13.10% | 11.60% |
Cutting Tools and Abrasives | 13.30% | 11.70% | 11.70% | 13.10% |
Electrical | 10.00% | 10.40% | 10.20% | 10.80% |
Aftermarket Automotive Supplies | 7.00% | 7.60% | 7.10% | 7.90% |
Safety | 7.00% | 4.70% | 6.40% | 4.70% |
Welding and Metal Repair | 1.40% | 1.30% | 1.40% | 1.50% |
Other Products | 14.20% | 12.00% | 14.20% | 11.20% |
Total Products | 100.00% | 100.00% | 100.00% | 100.00% |
Restricted Cash (Details)
Restricted Cash (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 | Sep. 30, 2019 |
Restricted Cash [Abstract] | |||
Restricted cash | $ 802 | $ 802 | $ 800 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Components of inventories | ||
Inventory, Gross | $ 67,083 | $ 60,500 |
Inventory Valuation Reserves | (4,865) | (4,595) |
Inventories, net | $ 62,218 | $ 55,905 |
Goodwill (Details)
Goodwill (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Goodwill [Roll Forward] | ||
Beginning balance | $ 20,923 | $ 20,079 |
Adjustment to original acquisition allocation | 0 | (12) |
Impact of foreign exchange | (447) | 515 |
Ending balance | $ 36,428 | $ 20,582 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | $ 23,203 | $ 15,759 | |
Accumulated Amortization | (4,476) | (3,424) | |
Net Carrying Value | 18,727 | 12,335 | |
Amortization of Intangible Assets | 1,100 | $ 1,000 | |
Trade Names [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 11,022 | 8,422 | |
Accumulated Amortization | (2,436) | (2,020) | |
Net Carrying Value | 8,586 | 6,402 | |
Customer Relationships [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 12,181 | 7,337 | |
Accumulated Amortization | (2,040) | (1,404) | |
Net Carrying Value | $ 10,141 | $ 5,933 |
Leases - Net Lease Cost (Detail
Leases - Net Lease Cost (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Leases [Abstract] | ||||
Consolidated Operating Lease Expense | $ 1,262 | $ 1,190 | $ 3,630 | $ 3,532 |
Consolidated Financing Lease Amortization | 63 | 60 | 165 | 159 |
Consolidated Financing Lease Interest | 8 | 10 | 22 | 23 |
Consolidated Financing Lease Expense | 71 | 70 | 187 | 182 |
Sublease Income | 0 | 0 | 0 | (160) |
Net Lease Cost | $ 1,333 | $ 1,260 | $ 3,817 | $ 3,554 |
Leases - Net Lease Assets and L
Leases - Net Lease Assets and Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Leases [Abstract] | ||
Total ROU operating lease assets | $ 8,938 | $ 10,592 |
Total ROU financing lease assets | 575 | 654 |
Total lease assets | 9,513 | 11,246 |
Total current operating lease obligation | 4,276 | 3,591 |
Total current financing lease obligation | 233 | 239 |
Total current lease obligations | 4,509 | 3,830 |
Total long term operating lease obligation | 6,414 | 9,133 |
Total long term financing lease obligation | 279 | 371 |
Total long term lease obligation | 6,693 | 9,504 |
Operating lease accumulated depreciation | 5,100 | 2,400 |
Finance lease accumulated depreciation | $ 400 | $ 200 |
Leases - Value of Lease Liabili
Leases - Value of Lease Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Operating Leases | ||
2019 | $ 4,599 | |
2020 | 3,780 | |
2021 | 1,733 | |
2022 | 720 | |
2023 | 175 | |
Subsequent years | 471 | |
Total lease payments | 11,478 | |
Less: Interest | 788 | |
Present value of lease liabilities | 10,690 | |
Financing Leases | ||
2019 | 254 | |
2020 | 153 | |
2021 | 101 | |
2022 | 35 | |
2023 | 2 | |
Subsequent years | 0 | |
Total lease payments | 545 | $ 700 |
Less: Interest | 33 | |
Present value of lease liabilities | 512 | |
Total | ||
2019 | 4,853 | |
2020 | 3,933 | |
2021 | 1,834 | |
2022 | 755 | |
2023 | 177 | |
Subsequent years | 471 | |
Total lease payments | 12,023 | |
Less: Interest | 821 | |
Present value of lease liabilities | $ 11,202 |
Leases - Leases Weighted-Averag
Leases - Leases Weighted-Average Lease Terms and Interest Rates (Details) | Sep. 30, 2020 |
Leases [Abstract] | |
Operating Leases, Weighted Average Term in Years | 3 years 1 month 6 days |
Operating Leases, Weighted Average Interest Rate | 5.08% |
Finance Leases, Weighted Average Term in Years | 2 years 8 months 12 days |
Finance Leases, Weighted Average Interest Rate | 5.37% |
Leases - Cash Outflows of the L
Leases - Cash Outflows of the Leasing Activity (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Leases [Abstract] | |
Operating cash flows from operating leases | $ 3,072 |
Operating cash flow from financing leases | 22 |
Financing cash flow from financing leases | $ 192 |
Credit Agreement - Covenant (De
Credit Agreement - Covenant (Details) | 9 Months Ended |
Sep. 30, 2020 | |
Loan Agreement [Line Items] | |
Minimum Debt Service Coverage Ratio | 1.15 |
Minimum Net Leverage Ratio | 3.25 |
Credit Agreement (Details)
Credit Agreement (Details) $ in Millions | 9 Months Ended | ||||
Sep. 30, 2020USD ($) | Aug. 31, 2020USD ($) | Aug. 30, 2020USD ($) | Jun. 30, 2020USD ($) | Sep. 30, 2019 | |
Credit Facility (Textual) [Abstract] | |||||
Minimum Net Leverage Ratio | 3.25 | ||||
Minimum Debt Service Coverage Ratio | 1.15 | ||||
Letter of credit | $ 36 | $ 40 | $ 15 | ||
Line of Credit Facility, Remaining Borrowing Capacity | $ 66 | ||||
Weighted average interest rate | 2.64% | 4.54% | |||
Revolving Credit Facility [Member] | |||||
Credit Facility (Textual) [Abstract] | |||||
JP Morgan Credit Agreement Limit | $ 100 | ||||
JP Morgan Agreement Potential Future Credit Limit | $ 150 |
Stock Repurchase Program (Detai
Stock Repurchase Program (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | |
Treasury Shares Repurchase [Abstract] | ||||
Stock Repurchase Program, Authorized Amount | $ 7,500,000 | $ 7,500,000 | ||
Treasury Stock, Shares, Acquired | 12,077 | 47,504 | 35,830 | 47,504 |
Average price of treasury shares repurchased during the period | $ 36.93 |
Severance Reserve (Details)
Severance Reserve (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Reserve for severance and related payments | ||
Balance at beginning of period | $ 909 | $ 359 |
Charged to earnings | 1,520 | 1,542 |
Cash paid | (1,239) | (925) |
Balance at end of the period | $ 1,190 | $ 976 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) $ in Millions | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |||
Share-based Payment Arrangement, Expense | $ (2.8) | $ 7.6 | |
Deferred Compensation Share-based Arrangements, Liability, Current and Noncurrent | $ 10.4 | $ 14.9 |
Stock-Based Compensation - Rest
Stock-Based Compensation - Restricted Stock Awards (Details) - Restricted Stock Units (RSUs) [Member] | 9 Months Ended |
Sep. 30, 2020shares | |
Stock-Based Compensation Details | |
Stock-based awards issued (shares) | 6,847 |
Executive [Member] | Cliff vest on March 2, 2023 [Member] | |
Stock-Based Compensation Details | |
Stock-based awards issued (shares) | 2,500 |
Executive [Member] | Cliff vest on March 9, 2023 [Member] | |
Stock-Based Compensation Details | |
Stock-based awards issued (shares) | 3,000 |
Certain members of the Company's Board of Directors [Member] | |
Stock-Based Compensation Details | |
Stock-based awards issued (shares) | 10,965 |
Stock-Based Compensation - Mark
Stock-Based Compensation - Market Stock Units (Details) - MSUs [Member] | 9 Months Ended |
Sep. 30, 2020shares | |
Stock-Based Compensation Details | |
Stock-based awards issued (shares) | 22,284 |
Minimum [Member] | |
Stock-Based Compensation Details | |
Equity Share Payout Range | 0 |
Maximum [Member] | |
Stock-Based Compensation Details | |
Equity Share Payout Range | 33,426 |
Stock-Based Compensation - Perf
Stock-Based Compensation - Performance Awards (Details) - PAs | 9 Months Ended |
Sep. 30, 2020shares | |
Stock-Based Compensation Details | |
Stock-based awards issued (shares) | 10,852 |
Minimum [Member] | |
Stock-Based Compensation Details | |
Equity Share Payout Range | 0 |
Maximum [Member] | |
Stock-Based Compensation Details | |
Equity Share Payout Range | 16,278 |
Stock-Based Compensation - Anti
Stock-Based Compensation - Anti Dilutive Options (Details) - shares | 3 Months Ended | 9 Months Ended |
Sep. 30, 2020 | Sep. 30, 2019 | |
Share-based Payment Arrangement, Option [Member] | ||
Stock-Based Compensation Details | ||
Antidilutive Stock Excluded from Computation of Earnings Per Share | 0 | 0 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | ||||
Income Tax Expense (Benefit) | $ 736 | $ 1,521 | $ 6,004 | $ 3,703 |
Effective income tax rate | 28.70% | 26.60% |
Related Party Disclosures (Deta
Related Party Disclosures (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2020 | Sep. 30, 2020 | |
Related Party Transactions [Abstract] | ||
Related Party Transaction, Expenses from Transactions with Related Party | $ 0.7 | $ 0.9 |
Segment Reporting (Details)
Segment Reporting (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)Segment | Sep. 30, 2019USD ($) | |
Segment Reporting [Abstract] | ||||
Number of Reportable Segments | Segment | 2 | |||
Segment Reporting Information [Line Items] | ||||
Total revenue | $ 90,277 | $ 94,779 | $ 253,458 | $ 282,219 |
Gross profit | 47,225 | 50,574 | 134,459 | 150,540 |
Operating Income (Loss) | 2,001 | 6,446 | 21,208 | 13,613 |
Interest Expense | 142 | 138 | 329 | 481 |
Other Nonoperating Income (Expense) | 615 | (13) | 15 | 798 |
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Noncontrolling Interest | 2,474 | 6,295 | 20,894 | 13,930 |
Lawson [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 79,806 | 83,461 | 224,511 | 250,895 |
Gross profit | 43,038 | 46,148 | 123,031 | 138,524 |
Operating Income (Loss) | 1,112 | 5,377 | 19,003 | 11,490 |
Bolt [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 10,471 | 11,318 | 28,947 | 31,324 |
Gross profit | 4,187 | 4,426 | 11,428 | 12,016 |
Operating Income (Loss) | $ 889 | 1,069 | $ 2,205 | 2,123 |
Service [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | $ 10,300 | $ 29,900 |
COVID-19 Risks and Uncertaint_2
COVID-19 Risks and Uncertainties (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | |
Risks and Uncertainties [Abstract] | |||
Canada Emergency Wage Subsidy | $ 900 | ||
Cash and cash equivalents | 17,193 | $ 5,495 | $ 8,626 |
Restricted cash | 802 | $ 802 | $ 800 |
Line of Credit Facility, Remaining Borrowing Capacity | $ 66,000 |