DXP Enterprises Inc (DXPE) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the DXP Enterprises 2010 fourth-quarter and year-end results conference call. (Operator Instructions). This conference is being recorded today, Wednesday, March 16, 2011.

I would now like to turn the conference over to Mr. Mac McConnell, Senior Vice President of Finance and CFO. Please go ahead, sir.

This is Mac McConnell, CFO of DXP. Good evening and thank you for joining us. Welcome to DXP's fourth-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 could 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 fourth-quarter 2010 results. David Little will share his thoughts regarding the quarter's results. Then we will be happy to answer your questions.

Sales for the fourth quarter increased 23.1% to $169.7 million from the fourth quarter of 2009. After excluding Quadna and D&F sales of $15.7 million for the quarter, sales for the fourth quarter increased 11.7%. Sales for Supply Chain Services decreased 4.9% to $31.6 million compared to $33.3 million for the 2009 fourth quarter. Sales of Innovative Pumping Solutions products increased 96.2% to $23.4 million compared to $11.9 million for the 2009 fourth quarter. After excluding Quadna, IPS sales of $4.3 million, IPS sales for the fourth quarter of 2010 increased [60.4%] from the fourth quarter of 2009. Sales by our service center segment increased 23.8% to $114.6 million compared to $92.6 million of sales for the fourth quarter of 2009. After excluding Quadna and D&F service center sales of $11.4 million, service centers segment sales for the fourth quarter of 2010 increased 11.4% from the fourth quarter of 2009.

When compared to the third quarter of 2010, sales for the fourth quarter of 2010 decreased 1.5%. After excluding D&F fourth-quarter sales of $2 million, sales for the fourth quarter declined 2.6%. This decline is less than the 4.7% fewer business days in the fourth quarter compared to the third quarter. Fourth-quarter 2010 sales for Supply Chain Services decreased 9/10 of 1% compared to the third quarter of 2010. Fourth-quarter 2010 sales of Innovative Pumping Solutions products increased 3.8% compared to the third quarter of 2010. Fourth-quarter 2010 sales by our service center segment decreased 2.7% compared to the third quarter of 2010. After excluding D&F sales, service center segment sales for the fourth quarter declined 4.3% from the third quarter.

Sales for all of 2010 increased 12.5% to $656.2 million from 2009. After excluding Quadna and D&F sales of $43.6 million, sales for 2010 increased $29.4 million or 5% from 2009. Sales for Supply Chain Services decreased 7.2% to $126.5 million compared to 2009 sales of $136.3 million. Sales of Innovative Pumping Solutions products increased 37.8% to $77 million compared to 2009 sales of $55.9 million. After excluding Quadna, IPS sales of $17.4 million, IPS sales for 2010 increased 6.6% from 2009.

Sales for service centers increased 15.8% to $452.7 million compared to $391.1 million of sales for 2009. After excluding Quadna and D&F, service center segment sales of $26.2 million, service center segment sales for 2010 increased 9.1% from 2009.

After excluding the $13.8 million charge to reduce the value of precision inventory and the $3.6 million of special charges recorded in the fourth quarter of 2009, gross profit for the fourth quarter of 2010 increased 22.4% compared to the 23.1% increase in sales.

Gross profit as a percentage of sales decreased to 29.3% in the fourth quarter of 2010 compared to 29.4% for the fourth quarter of 2009 after excluding the $13.8 million charge for precision inventory and a $3.6 million of special fourth-quarter charges. This decrease is primarily the result of the acquisition of Quadna, which has slightly lower margins than the rest of DXP.

Compared to the third quarter of 2010, gross profit as a percentage of sales for the fourth quarter of 2010 increased to 29.3% from 28.4% for the third quarter of 2010, primarily as a result of improved margins in the service center segment. This increase is primarily the result of improved margins for sales of fasteners.

Gross profit for all of 2010 increased 11.6% from 2009 after excluding the 2009 $13.8 million Precision inventory charge and the $3.7 million of special fourth-quarter charges. This 11.6% compares to the 12.5% increase in sales. Gross profit as a percentage of sales decreased to 28.7% from 28.9% for 2009, after excluding these special 2009 charges.

SG&A for the fourth quarter of 2010 increased $1.6 million or 4.3% from the fourth quarter of 2009 compared to the 23.1% sales increase. This increase is primarily the result of $4.3 million of SG&A expenses associated with Quadna and D&F, which were partially offset by approximately $2 million of special SG&A charges recorded in the fourth quarter of 2009. As a percentage of sales, SG&A decreased to 22.7% from 26.8% for the fourth quarter of 2009.

For all of 2010, SG&A increased $3.5 million or 2.4% compared to the 12.5% sales increase. This increase is primarily the result of $11.6 million of Quadna and D&F SG&A in 2010. As a percentage of sales, SG&A decreased to 23.1% from 25.3% for 2009. SG&A for 2010 as a percentage of sales declined primarily as a result of headcount reductions implemented during the second half of 2009 and during 2010. Excluding D&F and Quadna employees, headcount decreased approximately 1% during 2010 primarily as a result of consolidating back-office function.

Interest expense for the fourth quarter of 2010 decreased 9/10 of 1% from the fourth quarter of 2009. Interest expense for all of 2010 decreased by the same 9% -- 9/10 of 1%, I mean. These declines are the result of reduced average outstanding debt levels offset by increased rates on our credit facility.

On March 15, 2010, we amended our credit facility. This amendment significantly increased the interest rates and commitment fees applicable at various leverage ratios from the levels in effect before March 15, 2010. The amendment increased the cost of funds borrowed under our credit facility by approximately 200 basis points beginning on March 16, 2010.

On November 30, 2010, DXP acquired substantially all of the assets of D&F Distributors Inc. The purchase price of $13.4 million consisted of approximately $7.4 million paid in cash, approximately $2.9 million in the form of commissary notes bearing interest at the rate of 5%, and approximately $3.1 million in the form approximately 155,000 shares of DXP common stock.

Despite the $10.3 million of debt incurred with the acquisition of D&F, total long-term debt only increased approximately $5.1 million during the fourth quarter of 2010. During all of 2010, total long-term debt declined by approximately $1 million despite the $25 million of cash and notes paid for the acquisitions of Quadna and D&F.

During the fourth quarter of 2010, the amount available to be borrowed under our credit facility decreased approximately $1.5 million to approximately $50 million. The decline was caused by the $7.4 million of cash paid for D&F.

Capital expenditures were approximately $300,000 for the quarter and approximately $1.2 million for all of 2010. Cash on the balance sheet at December 31, 2010, was $770,000. Accounts Receivable and inventory balances were $99.8 million and $75.9 million respectively at December 31, 2010.

I am happy to report that the tone of our business has continued to improve from 2009.

Now I would like to turn the call over to David Little.

Thanks, Mac, and thank you to everyone on our conference call today. It seems like a long time ago but during the fourth quarter of 2008 -- yes, 2008 -- DXP had its best quarter ever and its best year ever. Additionally we had grown the Company at over a 50% compounded annual growth rate for the previous five years.

As we reflect on this success, what did we learn as a Company? Well, we learned how to take a fragmented industry and make it a part of our DXP culture, primarily through acquisitions. We learned that the whole DXP is stronger than the individual parts in the eyes of our customers. We learned that we were different, and we were winning against the competition. We have to have policies and procedures and operational excellence to control the amount of growth, along with the right balance of entrepreneurship to grow sales.

Then 2009 arrived with the big financial crisis and the economy came to a halt, just resulting in a substantial sales decline for DXP. As we reflect on 2009, what did we learn? Well, life does not always go the way we would like for it to go. DXP and its people are resilient. The business generates a significant amount of cash flow if properly managed in a downturn. When you don't know where the bottom is, acquisitions are out. Supercenters are very hard to create in an economic downturn. When sales go down or up, the bottom line goes up or down faster. A certain amount of debt on the balance sheet is manageable. When things get tough, then the tough get going, and DXP has a great group of people that are tough.

Then 2010 came and our business got better. We turned the corner. Sales started increasing. Acquisitions made sense again. Our two latest acquisitions, Quadna and D&F, have been perfect fits into our DXP family. They both have talented people, great customers and great products.

I would like to send a thanks to all our DXP people for their efforts and executions on our sales and operational strategies to be customer-driven. I believe that DXP is a stronger, more efficient company with a better team of leaders as we charged into 2011. Thanks also goes to our suppliers and their continued support to produce competitive quality products that help us grow market share, and thanks to our customers who value us as customer-driven experts and a MROP solution.

When we look at our segments, take IPS first, the IPS fourth-quarter 2010 sales were up 96.2% over the fourth quarter of 2009. They were also up 37.8% year over year. Their operating income was up 154.6% quarter to quarter and 37.5% year over year.

The oil spill and the ban on drilling had a negative effect on sales. But this was offset by one, onshore shale plays; two, the addition of Quadna; and three, a better economy for capital projects.

The good news for 2011 is the offshore ban on drilling has been lifted, and oil is at $100 a barrel. Activity for inquiries, orders has picked up in the fourth quarter of 2010, and we are anticipating an order for fire pumps to be placed before the end of March for $7.5 million scheduled to ship in 2011. And we have another order with an E&C and (inaudible) contractors booked this year for $1.9 million that will also ship in early 2012.

The activity of the offshore oil and gas projects is high. Activity for land-based oil and gas projects, activity is high. One indicator of this is our quote activity report, which we run every two weeks. In 2010 it normally ran about $35 million to $40 million in outstanding proposals. It is currently running around $60 million or about a 50% increase in proposal activity.

We believe the activity in the Eagle Ford play will significantly enhance our orders for 2011 and beyond, which we are just now penetrating that market. The HP-Plus, [NC] units, [black] units, [clean foot] technology products we are currently bidding into the Eagle Ford and the Gulf of Mexico are going to be big winners for us this year. IPS is working closely with our service center group in the Eagle Ford to gain headway for both segments.

We expect to see nice growth in this segment in our IPS segment for our business given two basic factors -- one, 85 plus oil prices, and two, the offshore drilling permits will continue to be issued.

DXP service center segment. Q4 2010 compared to Q4 2009 was up 23.8% and 15.8% year over year. Operating income was up 107% year over year. Our DXP service center segment emerged from a positive Q4 and continues with an optimistic outlook for Q1.

Our service center segment will continue to focus on supercenter development, service center expansion in the Southeast, value-added repair services, and regional distribution center opportunities. Several markets continue to improve such as oil and gas drilling, oil and gas terminals, chemical, general manufacturing, mining of gold, platinum, copper, food and beverage, tire manufacturing and grain handling. DXP continues to invest in its people, operations and sales. All DXP acquisitions (inaudible) business units combine to provide an optimum expertise and market coverage. This means that the customer-driven solutions for our customers, DXP's whole is greater than the sum of its parts, which results in greater expertise across various markets, thus enabling us to take market share away from the competition.

We have seen numerous examples such as when Quadna, a newly acquired company, expanded its business into safety products. We have also seen other existing companies like Rocky Mountain Supply expand their business into rotating equipment repair and new product sales. Just recently Rocky Mountain Supply was awarded a significant repair order for pumps, and the work is being done by Quadna's Golden, Colorado service center.

In December Quadna also received a significant order for safety products from an industrial customer in Colorado. Our Tier 1 service center growth plan includes further expansion into the Southeastern area of the United States. Our plan includes executing a rapid three location expansion in Moultrie, Georgia, Orlando and Jacksonville, Florida, in addition to an upgrade of our existing Atlanta service center. The existing locations will be relocated to adjoin a new regional distribution center slated to open in early Q2. We believe that customer service in the South Atlantic and neighboring regions will be bolstered by the regional distribution center currently under construction in Atlanta. The three service center expansions and newly created regional distribution center in Atlanta will allow our customer-driven experts in MRO solutions to reach previously underserved industries in the Southeastern United States such as poultry, mining, lumber, pulp and paper, OEMs and general manufacturing.

The growing region continues to pursue an organic strategy based on the recruitment of local sales professionals with established territories and close customer relationships. This increased coverage, in addition to the moderate growth within these industries, sets the stage for significant opportunities for organic sales growth in Q1 and beyond.

As DXP continues to expand its service capabilities from a local statewide level to a national one, the presence of DXP supercenters will grow. From 2011 on, DXP will continue to invest in supercenters. We are pleased to report significant progress in several supercenters currently under construction. The end of Q1 2011 will allow for the opening of one additional DXP supercenter in Grand Isle, Nebraska with more completions scheduled for Q2 and Q3 of 2011. As of 12/31/2010, we have 23 supercenters.

DXP supply chain service segment. Q4 revenues for Supply Chain Services saw a modest decline of 0.09% over revenues from the previous quarter, which is customary in Q4 with the impact of holidays and budget tightening as year-end approaches. Year over year this represents a 7% decline in sales, but a 28% increase in operating income. The implementation of two new on-site procurement stores was completed in the fourth quarter. The implementation of four new on-site procurement sites began during the fourth quarter, and completion will be done by the first part of Q1 2011.

SCS's strategic sourcing program has been instrumental in negotiating contract pricings by improving leverage of consolidated customer spin levels. This program has allowed us to live better and execute strategies to achieve our goals and enhance margins. This is evident in our Q4 results providing operating income increases while total revenue experience may decline.

During Q4 DXP signed contract expansions for two large customers, a beverage customer has renewed its commitment for their North American locations through the life of their agreement, and has pledged to identify and capture any diverted spend at these locations. Implementation of automated quality control processes in the beverage company's' parts and manufacturing facility has further improved our already world-class performance levels and provided other enhancement gains that will improve profitability during the life of this agreement.

As we move forward to 2011, we are cautiously optimistic that many of the investments initiated during the previous year will continue to yield positive results. Operational excellence and ensuring a day's work in a day was one of our main focuses. Our drive going forward in 2011 was to ensure that we are meeting customer expectations, carrying out our contractual commitments. This will allow us to execute the strategy of leveraging existing accounts.

In conclusion, 2010 was a rebuilding year. To me this means that we became more efficient, continued to invest in our growth strategies, including one, more products and inventory; two, continuing to build supercenters; three, grow our old salesman; four, new locations, six in the South Atlantic region, and new safety services in the Marcellus and Eagle Ford oil and gas areas; five, more sizes of our HP-Plus pump; six, new contracts and implementations for Supply Chain Services; seven, the restart of our pipeline of acquisitions; eight, and to continue to improve on operational excellence, sales excellence, margin enhancement and supercenters.

2011 we start from a growing foundation with improving markets, especially offshore and onshore oil and gas, chemical, mining, general manufacturing and grain handling. Our solid operational platform with the exception of putting all of our [FTS] slides P21 which will get done this year, we have also -- our senior management team has expanded to include a Senior Vice President of Corporate Development, a gentleman whose name is Kent Yee. He has a broad base of experience in corporate and investment banking. We look forward to his help in many areas of DXP with a big emphasis on growing and managing the growth of DXP going forward.

Our vision and our direction is set. We have a great team to execute our vision, and we all look forward to having a great year. I want to thank again our DXP people, customers, suppliers and shareholders for their continued support. Thank you and we are open for questions.

(Operator Instructions). Matt Duncan, Stephens Inc.

The first question I have got, David, just a point of clarification on the number of supercenters. I think you said 23. I believe last quarter you had said 24. Did something change in the definition of a supercenter, or am I just remembering incorrectly?

I think you are remembering incorrectly. 23 was the number.

Okay. So you are at 23, and is that where it is then? So you have not converted any locations in 2010?

It was 23 at the end of 2009, and it is 23 at the end of 2010.

Okay. And then you said it sounds like you will probably convert one here in the first quarter. Do you have any thoughts on how many you might be able to convert throughout 2011?

Yes. We think we will convert all 10 that we have really under construction right now in 2011.

Okay. That is great.

That is assuming that the economic climate stays as robust as we think it is going to be.

Okay. Just looking at the fourth-quarter service center revenues relative to the third, you were down just a little bit sequentially. Is there anything to that other than fewer selling days in general seasonality?

I think we had some harsh winter days, and I think Supply Chain Services had a few more days that the plants were actually closed besides these normal holidays. And so pretty much what you said.

Is there any way to quantify the impact on your business from the winter weather in January and February? Maybe if you could talk a bit about how the first quarter is going so far.

Yes, we actually -- we feel that -- actually we felt feel like we had a good fourth quarter. I do understand that it is sequentially down slightly. That seems to hold true so that all our guys felt like there was not anything to read into that more than just climate in holidays and etc. and just coming to the end of the year. In our first quarter, typically January is going to be our softest month in the quarter as we start off the new year people are working on their budgets and etc. And then February has fewer days, I believe, but sales are up, and then sales are cracking very positive in March.

Okay. Can you give us any update, maybe a little more detail on the greenfield expansion in the Southeast US? Did you officially add any locations there during the fourth quarter? And maybe talk a bit about what sort of revenue contribution you think you can get from that effort in 2011 and what kind of impact it may have on your operating profit for the year.

I will let Mac address the numbers, but yes, we started off with three locations that were approved pretty much back in -- I don't know when it all started, but the third quarter. It started in the third quarter. And then based on the success that [Mr. Gainey] is having in terms of hiring people, all our product lines, except for some of our pumps, we have been able to get. And so we have now authorized the startup of three additional stores. So that is a total of six. They have all been staffed, maybe not 100%, but they all -- we did not open one unless we had a salesman and an inside sales guy, one or two at least. And Mac, I guess you have been tracking the numbers.

Sure. I guess for the year 2010 the South Atlantic region had sales of approximately $2.3 million and lost a little over $300,000. And I guess part of that loss was in the fourth quarter, almost all of it. And the forecast for 2011 has increased that 2.3 million in sales to approximately a little over $8 million in sales, and the loss for the entire year is supposed to be about the same as the $300,000 loss that we had for 2010, maybe a little less. And the thought is that they will start -- the forecast is to start breaking even or making money in the fourth quarter. And that the rate of loss would decline each month as we go through 2011.

Okay. That is helpful. And the last thing I have got and I will hop back in the queue, in terms of Quadna and D&F, were they accretive to earnings in the quarter, and if so, how much?

Yes, they were both accretive. I mean D&F we only owned for a month. So it gets kind of picky. And then it gets into -- I guess I have to take it back. If you include the legal fees and costs of acquiring them all in one month, then they probably were not accretive. But if you -- the two acquisitions altogether in the fourth quarter, if you ignore expenses including the $100,000 of expenses, it probably added about $0.02 per share for the quarter, both Quadna and D&F combined.

Joe Mondillo, Sidoti & Co.

The first question just on the IPS business, obviously improving quite well. Excluding the Quadna, it looks like it improved from 15.8 to 19.1 on a sequential basis. What does your backlog look like, and are you expecting sequentially that things continue to improve like that?

I guess the backlog is growing. We usually don't disclose the backlog.

The backlog is growing. The activity is growing, and so we would expect and it is a pretty profitable piece of our business. So we are happy to see the growth that they are having, and we are going to see continued growth for 2011.

Do you think just looking at, say, the first quarter or the first half that sequentially looking at that 19.1 excluding Quadna, that that continues to improve going forward? Or was there abnormally -- were there any large orders in the fourth quarter or anything of that?

No, there really were not any special large orders in the fourth quarter, and I guess our expectation is that it is going to -- both -- all of IPS is going to continue to get better. That is because the energy business is good, and it is very heavily energy related. And, as David talked about, the level of quoting and the level of orders and all is growing.

Okay. And then --

It can be somewhat choppy, and orders we get today sometimes don't ship until a year later. But the business level is good.

Okay. And then just looking at the gross margin, a little better than I expected. You mentioned on the service center side with your fasteners business, is that sustainable, and how much of that is pricing, and what does the pricing situation look like and sort of what kind of gross margin profile should we think about for 2011?

I can comment about Vertex. Vertex makes more money when nickel commodity prices are going up. Now it feels pretty good about the fact that until recently here they have been pretty level and with a slight increase. So we still have a lot of things that are always being bought and brought in. So, as long as prices are stable, we feel pretty good about being able to maintain our margins.

And if prices are going up, well, then we get an external little bit of boost. The real killer and the real shocker, and we don't see this happening, is if commodity prices go down. Then that in 2009, which we saw, we had margins that were more like 27% versus 37%.

Okay. So, as long as those commodity prices stay at least flat, you should be able to sustain those margins?

Right.

Okay. And then on the service center side, I was wondering do you have the sales per day in the quarter versus the third quarter just to sort of give us a sense of on a per day level they were improving or not?

I guess I had not really ever calculated that by segment.

I guess I'm just trying to get a sense of whether most of it was because of the last days or maybe a little bit seasonality as well.

I guess if you're just comparing -- you know, take the number of business days and divide by sales, in the third quarter, sales by business day were $2,691,000, and in the fourth quarter, they were $2,781,000. So (multiple speakers) increased.

Okay. Great. And can you tell me the days in each quarter?

64 business days in the third quarter and 61 in the fourth.

Okay. Great. Thanks. Very helpful. And two other questions. Just one, could you explain to me what your primary use of cash is? Is it acquisitions and then maybe paying down the debt or vice versa?

And then lastly, I just was wondering if there were any costs, one-time upfront costs associated with opening up those service centers that you did in the fourth quarter that you will not see going forward?

I guess in 2010 we spent most of the money we generated on acquisitions. And if we are successful in finding more acquisitions, that will continue to be where we spend our money. If we don't find the acquisitions, then we will pay down debt.

But we need to realize that in 2009 -- of course, we did not do the acquisitions because we did not know where the bottom was. And so we paid down debt. We went from, what, a leverage ratio of almost 4; we were at 4 at one point. (multiple speakers) Okay. And so you say, well, we spent money on acquisitions. Yes, we have. We spent our free cash flow on acquisitions. But, at the same time, our leverage ratio of debt to EBITDA went from 4 to 1 to 2. --

2.6.

2.6 points. So I would assume that the bank is pretty happy with our credit.

Okay. So right now if the acquisitions are not there, that is your primary focus, and then secondary use would be on paying down the debt?

With a caveat that there is some level of debt -- I probably don't like to be at 4 to 1 -- but there is some level of debt of 2.5 or something that I'm pretty comfortable with. So I mean we're not going to just do acquisitions and run up debts and then hope everything is always better tomorrow. I think there is just a certain amount of leverage that is appropriate for the business.

Alright. And then any upfront costs associated with those service centers in the fourth quarter?

The upfront cost is generally the salaries of the people. It takes them a while to build a backlog of business. They don't -- you know, hopefully a year after you hire them, they sell a whole lot more on a monthly basis than they do when you first start. So that is really -- the upfront costs are this, I guess --

I guess it would not really be upfront then, right, because you're going to have to pay the salaries going forward anyways. What about the costs associated with the actual facility or the actual center?

Well, we are renting it, so --

Okay.

It is really not a cash --

Okay. So really no upfront cost issue? Okay. All right. Thank you very much.

(Operator Instructions). Matt Duncan, Stephens Inc.

Just a couple of follow-ups. David, you mentioned acquisitions as a growth driver, and it sounds like you have got a little bit of borrowing capacity, and clearly you have an appetite for acquisitions. Can you talk a bit about what the acquisition environment is out like there right now? Are you seeing a good flow of deals, and is there anything that is of interest to you at the moment?

Well, I have seen -- there's plenty of acquisitions. It seems to me that on the larger deals, the pricing is pretty expensive. Yet I think when we look at some of these businesses and you're looking at trailing EBITDA, the multiple of trailing EBITDA may appear a little high when, in fact, the forecast looks twice as good or something.

So I think we are having to look at what does the future hold in some of these deals. I still think they are all reasonably priced as long as we stay down in the, toward like the D&F, a $25 million revenue type companies that are not -- that don't get private equity attention. And so I feel pretty good. Nobody really asked, but if it was just a perfect world, I would have 10% organic growth, and I would do about 10% external growth.

Okay. So that goal that you had in the last cycle is still very much there?

Right.

Okay, that is helpful. In terms of -- and Joe asked this a little bit already -- but on the supplier price increases that you guys are seeing, what sort of price increases are you seeing in general? And when you look at 2011, how much of a tailwind do you think you may have at the top-line from pricing?

I'm not sure I understood that. I did not catch all of that. I'm sorry. (multiple speakers)

Were you talking about the pricing of --

(multiple speakers). You are asking about the inflation, and then it sounds like maybe you are asking do we think we're going to make a bunch of profit on having a lower price inventory if we sell at higher prices?

No, what I'm looking for is sort of, if your sales grow 20% in 2011 -- and I am not saying they will, but if they did -- how much of that 20% is price? Is it 2%, 3%, what kind of price spike do you see on revenues?

I think we are seeing cash -- I think on average we are seeing 4% or 5%.

Okay. Are there any particular types of products where pricing is running higher than others, David?

Well, I need to ask that question. Of course, I only see the manufacturers that are sending in price increases. I don't really see the ones that did not. So maybe I'm a little slanted. Let's get that data for you. I would like to know what the data is myself.

Okay. That would be great.

Probably isolated, but there was one -- and I don't remember who it was -- a certain product line, they were increasing at 13.8%.

So that is something I will assume that back. It's got to be (inaudible) latest, probably rubber hose, some kind of belt, something with petrochemicals?

(multiple speakers) Right, right.

Okay. And then the last thing I have got is on Supply Chain Services. It is a business that I know you have got new leadership there internally, which John Jeffery has really sort of flatlined each quarter through the year. Do you feel like you are in a position now where you can start growing that business in terms of your quarterly revenues there in 2011? Are you winning any new agreements there? What is the outlook for that piece of your revenue?

Yes, we have signed two new deals. We have seemed to have stopped the bleeding. I think we're having a little bit of issue with one account, so I'm not at liberty to talk about it. But pretty much besides that one account, we are all -- everything is pretty solid and signed up for the year. So I feel pretty strongly that John expects to turn the corner and have that business grow this year.

Okay. And then last thing, just sort of big picture directionally in the first quarter, if I hear you guys correctly, you are seeing continued sales momentum in your business, and you would expect first-quarter revenues to be up a little bit from the fourth quarter based on what you have seen so far?

That is correct.

I'm showing no further questions at this time. Ladies and gentlemen, this does conclude today's conference call. You may now disconnect, and thank you for your participation.