Good morning ladies and gentlemen and welcome to the Lawson Products' Second Quarter 2013 Earnings Call. This call will be hosted by Michael DeCata Lawson Products' Chief Executive Officer and Ron Knutson, Lawson Products' Chief Financial Officer; they will open the call with an overview of the second quarter results. There will be time for questions and answers. This call is being audio simulcast on the internet, via the Lawson Products' investor relations page on the company's website, lawsonproducts.com; a replay of the webcast will be available on the website through August 8, 2013. During this call the company will be providing an update on the business as well as covering relevant financial and operational information. I would like to point out the statements on this call and in the press release contain forward looking statements concerning goals, beliefs, expectations, strategies, plans, future operating results and underlying assumptions are subject to risks and uncertainties that could actual results to differ materially from those described. In addition, statements made during this call are based on the company's views as of today. The company anticipates that future developments may cause those views to changes. Please consider the information presented in that light. The company may at some point elect to update the forward looking statements made today but specifically disclaim any obligation to do so. I will now turn the call over to Lawson Products' CEO Mike DeCata.

Thank and good morning, thank you for joining our call this morning, I'd like to begin this discussion this morning by saying we're extremely pleased with the progress we've made in most areas of the company. Operationally, our McCook distribution facility is now fully functional, which is helping us achieve significant improvements in all operational metrics. While our McCook distribution center is delivering improvements, we anticipate even more improvements are yet to come. Some of the metrics which we've seen significant improvements include, improved order fill rate, reduced back orders, reduced outbound freight costs and improved packaging quality. These improvements in key performance indicators are having a positive impact on customer satisfaction. We also expect to achieve operating efficiencies in future quarters which in turn will result in lower costs. The Addison Illinois distribution center is now closed and the entire inventory has been redeployed to our distribution center network to fill orders enabling us to utilize inventory which was temporarily stranded. SG&A expenses were down 4.2 million versus a year ago, as we're benefiting from actions taken in 2012. However, we're continuing to examine all costs. We recently wrote our mobile versions of our Lawson and Kent, e-commerce websites. This will enable customers and sales reps to place orders, search for product information, check order status and conduct inventory look up functions for mobile devices in addition to their PCs and laptop computers. Our web orders continue to accelerate, it’s important to note that our web and mobile initiatives are designed to augment our in person value proposition rather than replace it. Now let me comment on sales, we continue to add sales reps, since the beginning of the year we've added 16 sales reps bringing our total to 773 sales reps. As we experience normal turnover, we're replacing…

Thank and good morning, thank you for joining our call this morning, I'd like to begin this discussion this morning by saying we're extremely pleased with the progress we've made in most areas of the company. Operationally, our McCook distribution facility is now fully functional, which is helping us achieve significant improvements in all operational metrics. While our McCook distribution center is delivering improvements, we anticipate even more improvements are yet to come. Some of the metrics which we've seen significant improvements include, improved order fill rate, reduced back orders, reduced outbound freight costs and improved packaging quality. These improvements in key performance indicators are having a positive impact on customer satisfaction. We also expect to achieve operating efficiencies in future quarters which in turn will result in lower costs. The Addison Illinois distribution center is now closed and the entire inventory has been redeployed to our distribution center network to fill orders enabling us to utilize inventory which was temporarily stranded. SG&A expenses were down 4.2 million versus a year ago, as we're benefiting from actions taken in 2012. However, we're continuing to examine all costs. We recently wrote our mobile versions of our Lawson and Kent, e-commerce websites. This will enable customers and sales reps to place orders, search for product information, check order status and conduct inventory look up functions for mobile devices in addition to their PCs and laptop computers. Our web orders continue to accelerate, it’s important to note that our web and mobile initiatives are designed to augment our in person value proposition rather than replace it. Now let me comment on sales, we continue to add sales reps, since the beginning of the year we've added 16 sales reps bringing our total to 773 sales reps. As we experience normal turnover, we're replacing…

As Mike indicated earlier the previously announced strategic restructuring and our focus on driving top line sales continues to have a positive act on our financial results. Let me share with you a few highlights for the quarter. First on a sequential basis our aggregate quarter-to-quarter sales increased by 1.1 million from Q1 2013 with one additional sale in a day. Second, our sales productivity measured as sales per rep per day increased 3.3% over a year ago. Third, excluding some on-time and seasonal items which we'll talk about in few minutes, our operating income was 1.7 million compared to a loss of 5.2 million a year ago. And fourth, our net income for the quarter was 397,000 or $0.05 per diluted share. I will now share some of the details. Please note that with the signing of the non-binding letter of intent to sell our subsidiary ASMP the results that I will speak to this morning reflect the MRO operations due to the discontinued operation treatment for this subsidiary. We finished the quarter with 68.3 million in MRO sales compared to 69.8 million a year ago, and 67.2 million from the first quarter of 2013. As compared to the first quarter the second quarter had one additional selling day. As compared to a year ago both quarters had 64 selling days. From the sequential average daily MRO sales basis, April sales finished at 1.049 million, May finished at 1.084 million and June finished at 1.069 million. For the second quarter, average daily sales were flat with the first quarter and we're down 2.2% from a year ago, primarily as a result of having an average of 5% or 43 fewer sales reps compared to year ago. Our rep count leveled off for the last six months of 2012 and…

We will now begin the question and answer session. (Operator Instructions). Our first question will come from Mathew Paul of Sidoti Matthew Paul - Sidoti & Company: I now want to ask the cash you expect to receive next quarter from the sales of business, we expect it to turn around and either hundred percent of that to pay down the debt and if so could you give a timeframe, is it going to be all at once or, kind of spread out there.

This is Ron Knutson. From a timing standpoint, we would expect that the closing on the sale would take place the end of the third quarter probably late in the quarter during September timeframe. And yes, we would utilize one hundred percent of the proceeds to pay down on our existing line. The sales price was $12.5 million, the net cash proceeds will be a little bit less than that as we have some closing expenses and so forth, but we will utilize that to pay down the line. Matthew Paul - Sidoti & Company: Moving forward to the additional sales reps you added, and you have a marginal decrease in productivity measures, from what I expect to be the additional 13 sales reps, could you comment on, if you could exactly any day, could you comment on where they are at right now in terms of their learning curve and maybe also include the reps you have added in the first quarter.

We meet with every new class of incoming reps, the management team does and I do as well. They are all over the ward as far as the nature of the territories, but the ramp seems to be pretty quick. There is a light variability based on its geographic density of customers, but it’s a little hard to give you a specific number, but anywhere from 6 to 18 months productivity ramp work is where we see the majority of the acceleration and then it starts leveling out a little beyond there and then the specifics of the geography and then the nature of the customer base in that geography; so that has the impact on the long-term trend. But the long and short of it is we are very pleased with the quality of the people we are getting. The hiring due to that increase is accelerating and we anticipate will continue to accelerate for the balance of this year. And again the ramp seems to be very effective and we continue to refine our training, our on-boarding processes across the board. All of that seems to be compressing the ramp to productivity. Matthew Paul - Sidoti & Company: Last question I wanted to ask you guys, if you could touch on the underserved markets, you’re saying, and are you deploying all your new reps towards those markets, or are you kind of using some to also penetrate your key accounts as well.

Sure Matt, again it’s Mike DeCata. I think I’ve said in previous calls we are relatively small player, $300 million round numbers, in a $20 billion or $25 billion space. So there are very few places that we would consider fully penetrated markets. With that said, we have a little bit of a bottle neck in the training process. So we try and deploy new sales reps into Greenfield territories, in a place where we can fully absorb them, and train them and compress that productivity period. But the over-arching idea here is that there are opportunities everywhere for us to grow sales reps and grow sales.

Sure Matt, again it’s Mike DeCata. I think I’ve said in previous calls we are relatively small player, $300 million round numbers, in a $20 billion or $25 billion space. So there are very few places that we would consider fully penetrated markets. With that said, we have a little bit of a bottle neck in the training process. So we try and deploy new sales reps into Greenfield territories, in a place where we can fully absorb them, and train them and compress that productivity period. But the over-arching idea here is that there are opportunities everywhere for us to grow sales reps and grow sales. :

And our next question will be from Arieh Coll of Coll Capital.

This question is for Mr. DeCata, regarding your sales reps, if you did kind of a data dive and look to all of your sales reps, are there a class of reps call at 10% or some other number that seem to be achieving a much higher increase in rate of sales productivity, in terms of growth and sales year-over-year versus being flat for the entire class of reps and what I am just trying to understand is what is possibly different and might explain why you have a certain group of reps that are seeing noticeable increases in sales year-over-year, some reps sort of have been with your one, two, three, four years; they are not just rookies. They are making excellent progress and what is it that makes them unique?

That’s a hard question to answer because there is so much variation, a little bit of it has to do with the nature of the customer relationships, sometimes a large strategic account that it becomes fully penetrated in a situation where you are working with one department of a company and then that rep extends that relationship because of the good initial work, extends that relationship to all other department. So fully penetrating large accounts whether they are strategic, multi-location accounts or a single location account, sometimes that’s the explanation, certainly, over a time when we bring in a new sales reps, our sales reps are consultative sellers and product experts. So it does take a little time for the sales rep to become that extension of the customers organization so gaining the technical knowledge, the product knowledge takes a little time so there is a ramp there and then our value proposition are high touch value proposition is very much dependent on developing a trust and again having our sales reps viewed as an extension of the customers organization. And that takes a little time in developing trust to not overstock the customer and also not let the customers bins run empty for items that are being used. All of that evolves over a time. Certainly, sales reps that are aggressive because of our sales reps are fully commissioned sales reps many people in the broad spectrum, some really want to earn more income every year and they drive very hard, they work long hours and they are very well rewarded, others become satisfied with the standard of living and they are comfortable not pushing to work longer hours or earn more income and so there is a broad spectrum of people that we deal with.

And there is two follow ups please, when you look at your total number of reps, it’s approximately 800 what’s the annual turnover rate you are experiencing with them?

Through the first half of the year, our turnover rate was running at about 10% and I think as you look at some industry stats relative to sales teams that’s actually on the low end I think the industry would tell you typically experience a little bit north of 15% from a total turnover prospective. So, as Mike mentioned in his comments certainly one of our major goals as we move throughout the next year is retention of our existing team as well.

Okay and just finally, you’d mentioned earlier how there is an opportunity for your sales reps productivity to grow although we are not seeing it right now, can you just embellish and what additional efforts are being made to boost sales productivity that would make one hopeful that a year from now when we are speaking, sales productivity on average might be let’s say 10% higher than it is today.

Yes there are broad range of activities, they include things like technology investments we are making to enable the sales reps and the customer to look at what’s up sales rep for a second to examine orders both using mobile technology as well as laptops and desktops. So there are technology investments which drive productivity. There are market segmentation activities that drive productivity and when we talk about market segmentation that includes bringing specialized products to the business to serve a unique market, it includes things like scripts and the list of (Inaudible) customers to call on in a broad spectrum of, again market segmentation with focus and training for the market. So those are two examples. There are other examples, we are doing supplier training. So we bring suppliers, and they present to our sales reps and in doing so, they increase their technical knowledge and their consultative selling skills that’s another area that enables our sales reps to be productive. And lastly, as you bring a sales rep Greenfield territory those are new customers for us. And so that’s a different angle on productivity is as we add new sales reps that are in Greenfield territories that’s a wide open territory for us to add net new customers and net new sales.

(Operator Instructions) And our next question will be from Cliff Orr of Privet Fund.

Would like to hear how you are thinking about sort of managing your debt levels with the sale of the subsidiary it looks like that maybe was at about a six to seven times ease at multiple brining in about 12 million of cash 12.5, how did you think about that in terms of the return on capital associated with what’s invested in that business as well as what it’s producing? And then secondarily, you’ve indicated that your are going to use those proceeds to pay down the debt. I believe the EBITDA covenant jumps to 3.5 million this next quarter or so. How do you think about sort of managing that hurdle versus the investment in the business vis-à-vis increase sales representatives and any sort of lag affect that may have on increasing sales and profitability? I would love to hear your thoughts. Thanks very much.

Sure Cliff this is Ron Knutson so let me maybe answer those in the reverse order. From an overall debt level perspective, as I mentioned earlier and we do plan to taking the debt proceeds and paying down on our existing line. And you are correct we do have through our bank agreement we do have minimum EBITDA as far as it gets to hit over the next four quarters. And we have been in conversations with our bank to adjust those minimum EBITDA requirements, taking into account the EBITDA that automatic previously has thrown off. We are not finished with those conversations but we do anticipate that that will get some relief there. Relative to the sale of Automatic and certainly (inaudible) jumped in on this as well but as we looked at it from a multiple standpoint for a $18 million to $20 million size of organization of price in the 6 to 6.5 certainly we felt was very appropriate and valued very fairly. So that business for us really was not a core focus of ours there was very little overlap from an end customer standpoint and also from a product standpoint. And really where we can excel is in the MRO side of the business and felt that it was appropriate that we redeploy those funds back towards growing the MRO business including utilizing some of those funds to add more sales reps.

Mr. Orr does that complete your questions?

It does thanks very much.

And this will end our question-and-answer session I would like to turn the conference back over to Mike DeCata and Ron Knutson for closing remarks.

And thank you for your interest in our organization. Let me reiterate our optimism in the future and the activities we have engaged in as we have talked throughout this call and in the release. Our focus on growing sales which includes a focus on adding sales reps and compressing the ramp period for their productivity as well improving overall productivity certainly of our sales reps but we see continued DC distribution center productivity gains and we see continued gains in our backroom operations. We also are focused on retaining our current team as more and more of our quality metrics improve customer satisfaction improves all these lead to better morale in the organization and more enthusiasm both customers contacting us which we have seen a lot of and as well enthusiastic sales and headquarters employees as well as distribution center employees. We continue to focus on our McCook operations which will continue to deliver productivity and cycle time compression. SAP continues to pay dividends for us we continue to exploit insight that we get from SAP and the level of analysis that we didn’t have before is certainly paying dividends. We are continuing to refine our operating processes with an eye on removing non-value-added activities across the company, continued focus on cost reduction by removing non-value-added activities, a focus on cycle time compression and reducing variation around cycle time and a focus on supply chain optimization, which we think will also pay dividends. Thank you again for your time. We appreciate your interest in our company. Have a great day.