Good morning, ladies and gentlemen, and welcome to the Lawson Products Second Quarter 2014 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 then 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 Web site, lawsonproducts.com. A replay of the webcast will be available on the Web site through September 2, 2014. 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 that 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 cause 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 change. 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 disclaims any obligation to do so. I will now turn the call over to Lawson Products' CEO, Mike DeCata.

Good morning and thank you for joining our call. We appreciate your interest in Lawson Products, and we're excited to share the progress we've made with you today. As we've done in previous calls, I'll first comment on three main areas, growing top line sales, continued operational improvements and the drive toward improved profitability. Ron will provide a financial update, and then we'll take questions after that. Our focus on top line sales; first, let me say we're very pleased with the progress we've made this quarter. Sales for the quarter at $72.1 million were 5.5% up over a year ago. ADS was 5.5% versus a year ago and 2.6% improvement over the previous quarter, over the first quarter. Our sales team continues to drive results. We added 42 sales reps during the second quarter. This is on top of the 30 sales reps we added in the first quarter. The new sales reps are spread throughout North America. For example, we added 15 sales reps in California, we added nine sales reps in Texas, seven sales reps in Louisiana, and 20 sales reps in Canada. We ended the second quarter with 878 direct sales reps. We're also pleased with the caliber of candidates we're seeing for these positions. The hiring and on-boarding pilot that we conducted last year enables us to improve and enhance the processes associated with hiring these new sales reps. For example, we've expanded our training program to include specific product demos, as well as lead development skills. With the 72 additions year-to-date, we're on track to achieve the 15% to 20% net new sales reps in 2014. We're also pleased to see improving productivity from our existing base of over 800 sales reps. Excluding reps that joined us in the last 15 months, sales reps…

Thank you, Mike, and good morning, everyone. As Mike indicated, we are very pleased with our operating and financial performance in the second quarter. We are clearly realizing the benefits of our previous investments and have established a platform for growth of the Company. In 2014, we are focused on growing revenues by expanding our sales team and by investing in the productivity of our existing sales reps, and at the same time, we are managing our costs closely. I will now share some of the highlights for the quarter. First, our operating income was $1.2 million for the quarter. This compares to an operating loss of $201,000 from a year ago and a loss of $4.7 million in the first quarter of 2014. Second, sales finished at $72.1 million for the quarter, during which there were 64 selling days. This represents an increase of 5.5% over the year-ago quarter and an increase of 2.6% over the first quarter. Third, we added a net 42 direct sales representatives, from 836 at the end of the first quarter, ending the second quarter with 878 direct sales reps. This is on top of the net 30 sales reps we added in the first quarter and puts us on target to meet our 15% to 20% rep growth, as previously communicated. And finally, we completed our previously announced sale and partial-leaseback of our Reno, Nevada Distribution Center for $8.6 million. As you recall, since we sold our Rutland Tools subsidiary, we've only been utilizing less than one-half of the facility. These proceeds, along with managing our working capital, allowed us to end the quarter with $2.4 million of outstanding debt under our credit facility, a decrease of $9.2 million from the first quarter. Let me now share some of the details. We finished…

We will now begin the question-and-answer session. (Operator Instructions) Our first question comes from Jack O'Brien from CJS Securities. Please go ahead.

You guys have been talking about the success you've had with existing sales reps. I was hoping you could give us some color on what the driving factors behind this productivity has been.

Yes. Jack, this is Mike DeCata. Thank you for that question. There are a number of factors. First, as we've taken away any of the, let me call it, friction, the inefficiencies around order fill rate, back-orders, it's important when a sales rep makes a promise to the customer that the promise can be delivered seamlessly and flawlessly. When there's anything that doesn't work, that takes time for the sales rep to attend to fixing it. So, operational excellence is a big part of driving sales rep productivity, as well market segmentation and putting tools in the hands of sales reps and training in the hands of sales rep. All of that drives productivity of the sales reps. And just sort of better align -- better training and operational excellence, all have that impact on driving sales rep productivity and our actions we're taking in the future to continue to drive more sales rep productivity.

Okay. And then while you guys are adding new reps, it sounds as if you're hiring pretty high quality people. And with that in mind, I was wondering if you could give us any insight on how the new rep sales are measuring up against your initial expectations for them.

Sure, Jack. This is Ron Knutson. So, as you know, we've been hiring -- sales reps actually have grown on a net basis for quite a few quarters. And I would say that there's a wide variation between the reps. Some of them are hitting grand slams and others are continuing to build out their market. So, right now, we feel comfortable with the trend rate that we're on as a whole with the new reps that we're hiring on a quarterly basis. As we look forward, I know – I've made this comment in the past, there is a ramp up period. I think that's certainly our expectation and its just reality. In effect, the reps that we're hiring in 2014, really the benefit of those reps from a sales perspective to the Company will really come probably more so in 2015 and 2016 and future years. So, there certainly is an investment in the first year, and we're looking for more growth in year-two and year-three as they build out their book of business.

And let me add. As we've gone through this process, now that we're back on to the trend of hiring sales reps, the pilot that we conducted in 2013 around the on-boarding, the training, even the selection process, the interview process, all of that now -- we're through this Lean Six Sigma process -- we're looking at the time it takes to fill the rep job both from a replacement rep where there is an existing book of business as well the greenfield rep. But all of this -- sort of this systemic approach to bringing reps on, we believe will have the impact of compressing that period until they become more profitable. So, if we can compress a month or two out of it, they become profitable that much quicker.

All right, great. And then last quick question; you guys addressed us a little bit in your prepared remarks, but looking at sales rep hiring for next year, can we expect it to be on kind of the same track that we're on right now or any color you can give?

Yes. We're in the beginning stages of thinking through the on-boarding process. Certainly there is vacant territory out there in every market, with such a large available market to us. So we are clearly on a path to add more reps. The absolute number will depend on the ability to bring them on, district sales managers' ability to train them and on-board them, so all of those are considerations. We don't have a really good sense, but it will be a material number again next year. I'm not sure if it will be as large as this year or not.

(Operator Instructions) This concludes our question-and-answer session. I would like to turn the conference back over to Mike DeCata for any closing remarks.

Thank you, Kate. Appreciate that. Thanks again for your interest in the Company. We're pleased with the second quarter results. Clearly, the Company has turned the corner, and it's enabled us to focus on three primary areas, which will continue to be our focus in the future; first, top line growth; second, operational excellence; third, improving earnings. We're making progress on all of these areas by improving customer service and also by investing in our teammates. Lastly, I would like to take this opportunity to thank the hardworking and dedicated people at Lawson Products. Their dedication, professionalism has enabled us to grow and improve the service we provide our customers. Thanks again and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.