DXP Enterprises CEO Discusses Q2 2010 Results - Earnings Call Transcript

DXP Enterprises CEO Discusses Q2 2010 Results - Earnings Call Transcript
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DXP Enterprises Inc. (DXPE)

Q2 2010 Earnings Call

August 22, 2010 10:00 am ET

Executives

Mac McConnell - SVP of Finance and CFO

David Little - CEO

Analysts

Matt Duncan - Stephens

Holden Lewis - BB&T

Joe Mondillo - Sidoti & Company

Presentation

Operator

Welcome to the DXP Enterprises Inc. 2010 second quarter results conference call. (Operator Instructions)

At this time, I'd like to turn the conference over to Mac McConnell, Senior Vice President of Finance and Chief Financial Officer.

Mac McConnell

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Good evening. Thank you for joining us. Welcome to DXP's second quarter conference call. David Little, our CEO, will also speak to you and answer your questions.

Before we begin, I want to remind you that today's discussion will include forward-looking statements. We want to caution you that such statements are predictions, and actual events or results can differ materially. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis is contained in our SEC filings, but DXP assumes no obligation to update that information.

I will begin with a summary of DXP's second quarter 2010 results. David Little will share his thoughts regarding the quarter's results. Then we will be happy to answer questions.

Sales for the second quarter increased 15.9% to $167.3 million from the second quarter of 2009. After excluding the Quadna sales of $13.4 million, sales for the second quarter increased 6.6%. Sales for the Supply Chain Services segment decreased 5.7% to $31.5 million, compared to $33.7 million for the 2009 second quarter.

Sales for Innovative Pumping Solution products increased 41.1% to $18.7 million, compared to $13.3 million for the 2009 second quarter. After excluding Quadna IPS sales of $6.3 million, IPS sales for the second quarter of 2010 decreased 6.4% from the second quarter of 2009.

Sales of MRO products by our service centers increased 19.8% to $117.1 million, compared to $97.7 million of sales for the second quarter of 2009. After excluding Quadna MRO sales of $7.1 million, MRO sales for the second quarter of 2010 increased 12.5% from the second quarter of 2009.

When compared to the first quarter of 2010, sales for the second quarter of 2010 increased 13.8%. After excluding Quadna sales, second quarter 2010 sales increased $6.9 million or 4.7% over first quarter 2010. Second quarter 2010 sales for supply chain services were flat compared to the first quarter of 2010.

Second quarter 2010 sales of innovative pumping solutions products increased 32.7% compared to the first quarter of 2010. After excluding Quadna innovative pumping solutions, IPS sales for the second quarter 2010 increased 1.3% from the first quarter of 2010. Second quarter 2010 sales of MRO products by our service centers increased 13.4% compared to the first quarter of 2010. After excluding Quadna MRO sales, MRO sales for the second quarter of 2010 increased 6.5% from the first quarter of 2010.

Sales for the first half of 2010 increased 4.1% to $314.3 million from the first half of 2009. After excluding Quadna sales of $13.4 million, sales for the first half of 2010 decreased $1.1 million or 0.4% from the first half of 2009. Sales for supply chain services decreased 9.2% to $62.9 million compared to the 2009 first half sales of $69.3 million.

Sales of innovative pumping solutions products increased 3.9% to $31 million, compared to 2009 first half sales of $29.8 million. After excluding Quadna IPS sales, IPS sales for the first half of 2010 decreased 17.2% from the first half of 2009.

Sales of MRO products by our service centers increased 8.6% to $220.4 million, compared to $202.9 million of sales for the first half of 2009. After excluding Quadna MRO sales, MRO sales for the first half of 2010 increased 5.1% from the first half of 2009.

Gross profit for the second quarter of 2010 increased 15.8% from the second quarter of 2009, compared to or consistent with the 15.9% increase in sales. Gross profit as a percentage of sales decreased to 28.6% from 28.7% in 2009 second quarter. This decrease is the result of the acquisition of Quadna, which has a slightly lower gross profit percentage than the rest of DXP.

Gross profit as a percentage of sales for the second quarter of 2010 increased to 28.6% from 28.5% for the first quarter of 2010. Gross profit for the first half of 2010 increased 2.7% from the first half of 2009, compared to the 4.1% increase in sales. Gross profit as a percentage of sales decreased to 28.6% from 29% in 2009's first half. This decrease is primarily the result of the effect of the economy and product mix.

SG&A for the second quarter of 2010 increased $2.5 million or 6.9% from the second quarter of 2009, compared to the 15.9% sales increase. This increase is a result of the $2.6 million of SG&A expenses associated with Quadna. The $2.6 million includes $500,000 of pre-tax acquisition expenses. For the first half of 2010, SG&A decreased 2.2% compared to the 4.1% sales increase. This decrease is primarily the result of decreased payroll related expenses.

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