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Chicago-based Lawson Products Inc. (NASDAQ:LAWS), No. 27 on MDM’s list of the top 40 industrial distributors, announced a strategic restructuring consisting of initiatives to reduce its cost structure, improve operating efficiency, enhance revenues and improve its liquidity position.
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The initiatives are expected to generate net annualized savings of about $20 million.
With these initiatives, the distributor said it has received a commitment letter from its lender to replace its existing credit facility with a new five-year, $40 million facility, which provides additional flexibility to meet financial covenants going forward.
The restructuring includes the elimination of 100 positions (11 percent) from Lawson’s workforce, including several senior executive positions. This includes the COO position that is currently open. The sales force will be unaffected. The distributor also expects to complete other cost-cutting measures including a rationalization of inventory and a reduction of costs such as travel, marketing and net outbound freight expenses.
The distributor also outlined steps it would take to improve operational efficiencies, including simplifying its business processes, flattening the organization and “recapturing lost margin opportunities.” The company is streamlining its customer-fulfillment process and inventory management with the consolidation of three Illinois locations into a single operation in McCook, IL.
“We have made significant progress over the past 18 months in the transformation of the company, including the implementation of our ERP system, commencing the sales-channel transformation and optimizing our distribution network,” said Thomas Neri, President and CEO. “At the same time, with an increased focus on MRO, we have consolidated a number of units and sold two non-core operations, which represented approximately $80 million of annual revenue at the time of their sales.
“It is necessary, therefore, that we adjust our cost structure to better balance against our current revenue base in order for us to improve our operating results. Accordingly, the company is taking the steps it believes necessary to build the foundation of operational excellence required to succeed.”
Neri said that the distributor’s strategic restructuring builds on earlier activities, including the consolidation of activities aimed at tightening the company’s MRO focus, the implementation of SAP, which went live in August 2011, as well as the network-optimization and sales-transformation initiatives.