DXP Enterprises CEO Discusses Q3 2010 Results - Earnings Call Transcript

DXP Enterprises Inc. (

DXPE

)

Q3 2010 Earnings Call

November 1, 2010 5:00 PM ET

Executives

Mac McConnell – Senior Vice President, Finance and CFO

David Little – Chief Executive Officer

Analysts

Matt Duncan – Stephens Capital Management

Joseph Mondillo – Sidoti & Company

John Cooper – BB&T Capital Markets

Presentation

Operator

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Good afternoon, ladies and gentlemen. Thank you for standing-by. Welcome to DXP Enterprises Inc. Third Quarter 2010 Results Conference Call. During today’s presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be open for question. (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. Please go ahead, sir.

Mac McConnell

Thank you. This is Mac McConnell, CFO of DXP. Good evening and thank you for joining us. Welcome to DXP's third 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.

I will begin with a summary of DXP's third 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 third quarter increased 20.1% to $172.2 million from the third quarter of 2009. After excluding Quadna sales of $14.5 million, sales for the third quarter increased 10%.

Sales for Supply Chain Services decreased 5.2% to $31.9 million compared to $33.7 million for the 2009 third quarter. Sales of Innovative Pumping Solutions products increased 59.8% to $22.6 million compared to $14.1 million for the 2009 third quarter. After excluding Quadna, IPS sales of $6.8 million, IPS sales for the third quarter of 2010 increased 11.5% from the third quarter of 2009.

Sales of MRO products by our service centers increased 23.1% to $117.7 million compared to $95.6 million of sales for the third quarter of 2009. After excluding the Quadna, MRO sales of $7.7 million, MRO sales for the third quarter of 2010 increased 15.1% from the third quarter of 2009.

When compared to the second quarter of 2010, sales for the third quarter of 2010 increased 3%. Third quarter 2010 sales for Supply Chain Services increased 1.5% compared to the second quarter of 2010. Third quarter 2010 sales of Innovative Pumping Solutions products increased 20.4% compared to the second quarter of 2010.

Third quarter 2010 sales of MRO products by our service centers increased six tenths of 1% compared to the second quarter of 2010. Sales for the first nine months of 2010 increased 9.2% to $486.5 million from the first nine months of 2009. After excluding Quadna sales of $27.9 million, sales for the first nine months of 2010 increased $13.2 million or 3% from the first nine months of 2009.

Sales for Supply Chain Services decreased 7.9% to $94.8 million compared to the 2009 first nine months sales of $103 million. Sales of Innovative Pumping Solutions products increased 21.9% to $53.6 million compared to 2009 first nine months sales of $44 million. After excluding Quadna IPS sales of $13.1 million, IPS sales for the first nine months of 2010 decreased 8% from the first nine months of 2009.

Sales of MRO products by our service centers increased 13.3% to $338.1 million compared to $298.5 million of sales for the first nine months of 2009. Sales of MRO products -- after excluding Quadna MRO sales of $14.8 million, MRO sales for the first nine months of 2010 increased 8.3% from the first nine months of 2009.

Gross profit for the third quarter of 2010 increased 19.9% from the third quarter of 2009 compared to the 20.1% increase in sales. Gross profit as a percentage of sales was 28.4% for the third quarter of 2010 and the third quarter of 2009. Gross profit as a percentage of sales for the third quarter of 2010 decreased to 28.4% from 28.6% for the second quarter of 2010.

Gross profit for the first nine months of 2010 increased 8.2% from the first nine months of 2009 compared to the 9.2% increase in sales. Gross profit as a percentage of sales decreased to 28.5% from 28.8% in the first -- 2009's first nine months. This decrease in the gross profit percent is primarily the result of the effect of the economy and product mix.

SG&A for the third quarter of 2010 increased $3.6 million or 10.2% from the third quarter of 2009 compared to the 20.1% sales increase. This increase is primarily the result of $2.7 million of SG&A expenses associated with Quadna. As a percentage of sales, SG&A decreased to 22.5% from 24.5% for the third quarter of 2009.

For the first nine months of 2010, SG&A increased $1.9 million or 1.7% compared to the 9.2% sales increase. This increase is primarily the result of the $5.3 million of Quadna SG&A in 2010 as a percentage of sales, SG&A decreased to 22.3% from 24.9% for the first nine months of 2009. SG&A for the first nine months of 2010 as a percentage of sales declined primarily as a result of headcount reduction implemented in the second half of 2009.

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