DXP Enterprises Inc (DXPE) 2011 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to DXP Enterprises Incorporated first quarter 2011 results conference call. During today's presentation, all parties will be in a listen-only mode, but following the presentation, the conference will be opened for questions. (Operator Instructions)

I would now like to turn the conference over to 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 first 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 those 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 first quarter 2011 results, David Little will share his thoughts regarding the quarter's results, then we would be happy to answer questions.

Sales for the first quarter increased 24.6% to $183.1 million from the first quarter of 2010. After excluding Quadna and D&F sales of $18.7 million, sales for the first quarter increased 11.8%.

Sales for the supply chain services increased 10.9% to $34.9 million, compared to $31.4 million for the 2010 first quarter.

Sales of innovative pumping solutions products increased 35.9% to $16.7 million, compared to $12.3 million for the 2010 first quarter. After excluding Quadna IPS sales of $3.3 million, IPS sales for the first quarter of 2011 increased 9% from the first quarter of 2010.

Sales by our service centers segment increased 27.4% to $131.6 million, compared to $103.3 million of sales for the first quarter of 2010. After excluding Quadna and D&F service centers segment sales of $15.4 million, service centers segment sales for the first quarter of 2011 increased 12.4% from the first quarter of 2010.

When compared to the fourth quarter of 2010, sales for the first quarter of 2011 increased 7.9%. After excluding 2 months of D&F first quarter sales of $4.2 million, sales for the first quarter increased 5.4%. This increase is more than the 4.9%; more business value than the first quarter compared to the fourth quarter.

First quarter 2011 sales for supply chain services increased 10.1% compared to the fourth quarter of 2010.

First quarter of 2011 sales of innovative pumping solutions products increased 28.8% compared to the fourth quarter of 2010. The sequential decline in IPS sales was the result of the lumpy nature of IPS sales. The level of IPS orders is strong, and we expect a significant increase in IPS sales in the second half of 2011.

First quarter of 2011 sales by our service centers segment increased 14.8% compared to the fourth quarter of 2010. After excluding 2 months of D&F sales, service centers segment sales for the first quarter increased 11.1% from the fourth quarter.

Gross profit for the first quarter of 2011 increased 25% from the first quarter of 2010, compared to the 24.6% increase in sales. Gross profit as a percentage of sales increased to 28.6% in the first quarter of 2011, compared to 28.5% for the first quarter of 2010. Compared to the fourth quarter of 2010, gross profit as a percentage of sales for the first quarter of 2011 decreased to 28.6% from 29.3% for the fourth quarter of 2010 primarily as a result of lower margins in the service centers and supply chain segments. The 2011 gross profit percentage is close to the 28.7% gross profit percentage for all of 2010 and does not signify a significant change in our business.

SG&A for the first quarter of 2011 increased $5.7 million or 16.1% from the first quarter of 2010 compared to the 24.6% sales increase. The $5.7 million increase in SG&A is primarily as a result of $3.8 million of SG&A expenses associated with Quadna and D&F. As a percentage of sales, SG&A increased to 22.3% from 23.9% for the first quarter of 2010 and 22.7% for the fourth quarter of 2010. D&F SG&A for the first quarter was approximately $1.3 million, which, if you take two-thirds of that for 2 months, would be about $850,000 of increase from the fourth quarter.

Interest expense for the first quarter of 2011 increased 2.8% from the first quarter of 2010. The small increase is a result of the increased rates on our credit facility. Interest expense for 2011 declined 13.8% from the fourth quarter of 2010 because of lower average outstanding debt.

Total long-term debt decreased approximately $4.7 million to $109.8 million during the first quarter of 2011. During the first quarter of 2011, the amount available to be borrowed under our credit facility increased $12.7 million to approximately $62.8 million. The increase in availability is the result of the effect of increased receivables and inventories on the asset test combined with the decline in debt.

Capital expenditures were approximately $500,000 for the quarter. Cash on the balance sheet at March 31, 2011, was $3.3 million. Accounts receivable and inventory balances were $110.7 million and $79.1 million respectively at March 31st.

I'm happy to report that the tone of our business has continued to improve from 2010.

Now, I'd like to turn the call over to David Little.

Thanks, Mac, and thank you to everyone that's on our conference call today.

The first quarter gave us a nice start to what looks and feels like a great 2011. Sales up 24.6%, sequentially up 8%, has proved to me that the economy and our growth strategies are working and is creating an environment at DXP that is positive and fun.

Gross profit margins are not where I'd like to see them, but given that the mix of the sales increase was mostly from supply chain services and the OEMs in the oil and gas sector, both of which have lower margins, the fact that margins are up over last year, and IPS should have a great second half of the year, which has higher margins, I believe we will continue to see improvement on a year-over-year basis.

Selling expenses as a percent of sales continues to make an improvement, despite the large amount of growth investments that we've made in the first part of the year that should result in additional sales growth as we proceed through the year. I can assure you the management team is focused on growing sales and operating margins at the same time.

Our bottom-line results, a 77% increase over last year, is the result of better market conditions, our sales strategies, strengthening of our balance sheet, working capital management, and improved operational efficiencies. We expect this to continue to improve as the year progresses because of the oil and gas industry, dedicated DXP people with a clear vision and an actual plan to make us better.

EBITDA margins improved from 6.2% of sales to 7.6% for an increase of 52%. This important metric fuels our ability to have substantial growth, both organic and through acquisitions.

I would like to compliment both Quadna and D&F, our latest acquisitions, for the fine job they have done and their financial performance. Their conversion to the DXP family has been amazing. And I'd also like to thank the people that helped make this transition a big success.

Let's now talk about our three segments. DXP service centers; DXP service centers segment emerges from a positive Q1 and continues with an optimistic outlook for Q2. Our service centers segment will continue to focus on supercenter development, supercenter expansion in the Southeast and in South Texas, value-added repair services, and a new regional distribution center serving the East Coast.

Several markets continue to improve, such as oil and gas, oil and gas terminals, ethanol plants, chemical manufacturing, mining of gold, platinum, uranium, copper, food and beverage, car manufacturing, grain handling, and second-tier automotive manufacturing.

DXP continues to invest in its people, operations and sales. All DXP acquisitions and business units combine to provide optimum expertise and market coverage. That means customer-driven solutions for our customers. DXP 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 in the South-Central region the safety service division grew 45% year over year with a 4% margin improvement in the safety service and safety product sector. This was achieved by leveraging in-house expertise, along with our pump and MRO customer relationships to provide customers -- customer-driven safety solutions as a pull through. An example of this activity has been in the development of our new safety services offering in the Eagle Ford Shale play from a sponsoring oil and gas customer.

Additionally, we expect expansion of Cushing, Oklahoma's oil storage capacity from 58.6 million barrels to 76.7 million barrels and the addition of 574 miles of pipeline, 400,000 barrels a day, from Cushing, Oklahoma to Houston, Texas by the year 2012. This represents growth opportunities for our safety services, rotating equipment and MRO sectors in the South-Central and North Texas regions.

Our Q2 MROP growth plans continue with future expansion in South Texas and the Southeast areas of the United States through new service center operations. The South Texas region continues to expand their safety services and rotating equipment footprint throughout the Eagle Ford Shale.

At the request of our customer sponsor, we've established a base camp south of San Antonio to focus on the infrastructure and drilling projects in the area. Our safety service team is currently involved in the onsite supervision at various pipeline and storage projects in the area. Our business development team continues to make significant progress in securing additional infrastructure and drilling prospects in the area.

Our synergistic approach to the Eagle Ford Shale includes a rotating equipment team that is focused on production and completion opportunities in the shale play. Our rotating equipment team has already secured significant business in saltwater disposal and various production applications. We are confident that our superior expertise and customized solutions around safety and rotating equipment is the ideal fit for the future demands of the Eagle Ford Shale.

In Q1, the Moultrie, Georgia service center was completed and preparations began for the planned Orlando and Jacksonville, Florida locations. In the current quarter, the Moultrie service center will continue contributing revenues as it begins to develop business and serve the South Georgia market. Similarly, the Orlando and Jacksonville service centers will be completed, and our forecast is to begin generating revenues by late Q3 and early Q4.

Training for the new personnel and operational expansions were the primary focus of the regional management team in Q1. As the local sales team begins to identify local markets, specific inventory and construction to be completed in Florida, the regional management team will begin to shift its focus from recruiting and operational expansion to sales development and providing customer-driven solutions.

As Q2 gets underway, we see steady improvement in the overall economy and regional marketplace of the Southeastern United States. We look forward to continued growth in the market.

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 that the North-Central regional management team has successfully grown our Grand Isle service center to supercenter status in the first quarter. This upgrade marks the [sixth] supercenter in the North-Central region. We will continue to convert our remaining 9 stores in progress to supercenter status through the remainder of the three quarters in 2011. So, we now have 24 supercenters and 9 in progress.

Supply chain service segment; revenues from the supply chain service segment during Q1 saw an increase and the bottom line grew over the previous quarter as a result, in part, of the implementation of two onsite stores during Q4. Implementation of two onsite stores and two onsite procurement programs were completed during the first quarter. Revenues from these sites added to the overall growth to SCS segment experienced during the first quarter. We are confident top and bottom line will continue to grow as we move forward.

Two of our customers in the energy sector expanded and extended their contractual agreements. The new agreements signed by one of the leading energy companies in the Southwest adds industrial supplies to existing safety agreements for all 7 locations under the new agreement, potentially doubled by the end of the calendar year.

The second contract expansion signed by one of the leading energy sector companies in the Rust Belt and Midwest region expands the product scope potential, increasing their purchases by nearly 100%.

During the first quarter, we also signed an extension to a North American premier railroad company, lengthening the existing agreement for an additional 3 years.

We are pleased to report that the SCS segment signed a supply chain solution agreement with its oil field service customer. This solution delivers DXP's product value proposition across multiple product categories, such as bearings and PT, pumps, hydraulics, field, gaskets, and industrial supplies. This agreement will service 5 of their manufacturing plants and a multiple field that counts 45-plus locations through the US.

On a lesser note, one of SCS's customers in the food industry recently revised their corporate vision with integrated supply and will no longer be part of their strategy. This customer will operate under a more traditional service center model utilizing national system agreements.

Operationally, SCS has implemented operational excellence and 5S, which stands for standardizing, sustained, sort, set, and shine at all our large facilities and customers in Dallas. Operational excellence and 5S procedures are being implemented in all of our facilities and continue to be a priority and a major focus in helping us achieve a days' work in a day across all sites. The supply chain service segment continues to lean their operational expenses, and as a result SG&A continues to shrink.

Looking into the future, two recent graduates have joined the supply chain service team as bench trainees. We are confident that their new energy and ideals will bring other boasts to the SCS segment's positive momentum.

P21, our ERP system, implementation is still scheduled for three beta sites in mid-May, and barring no interruptions, we expect completion of all sites sometime during the second half of the year. As of Q1, SCS has 53 onsite locations and serves 27 offsite locations.

IPS; activity in the IPS Group remains very strong as the offshore activity is picking up. Prolog of outstanding proposals are currently above $60 million and our backlog continues to increase. Activity at most of engineering contractors remains strong with multiple million-dollar projects with oil and gas companies. With oil above $100 and gas above $4, I see this trend continuing.

Our current shop load is only requiring 1 shift, but we plan to go and put a second shift in the welding shop by mid-Q2 due to anticipating that the current order status and delivery second shift will run through Q3 and possibly into Q4. At present load, we do not anticipate a second shift in the assembly area. However, this can quickly change, and we are prepared to react if necessary to capture orders and to support our customers' needs.

Based on the requests from major engineering contractor customers, we have upgraded our engineering server network. This will allow DXP to keep pace and provide data to the E&Cs in [4 months] to allow them to handle in a more efficient manner. This upgrade will be a differentiator from some of our competitors. The upgrade will provide faster processing time for drawings and calculations creating significant efficiencies.

Onshore activity for oil and gas continues to grow. Current market conditions are good. Our outlook for Q2 is good. Service and repair have us at near maximum capacity. If we were successful in finding qualified personnel, we would be looking to expand in this area.

Midstream oil and gas today is slow, with present business being mostly service, repairs and [rewrites]. We do have outstanding quotes for several pipeline projects. None have resulted in orders. And on a couple of occasions, we are aware that we've lost the order based on the fact that they bought new OEM equipment. You remember that our midstream offering is remanufacturing of core bodies, and so we normally -- what we offer is quicker deliveries and a lesser price. But, given today's environment, the OEMs have a pretty quick delivery, and so we have lost some orders to them.

Finally, DXP's HP Plus is coming along very nicely. We've added a person that has a great deal of knowledge in this marketplace with not only product knowledge, but customer knowledge and has worked for two of our competitors in this field. So, we look forward to increased activity along our HP Plus product offering for IPS.

In conclusion, Q1 is a nice start, and the rest of the year looks very promising. All of our markets look good, especially oil and gas. IPS will improve our margins as the year progresses, especially in the second half of the year. I believe vendor price increases will slow down, and our margins will improve as we catch up on passing them along to our customers. I base this comment on the fact that I -- as Bernanke said, that our commodity prices should start stabilizing, which -- since I've heard from several manufacturers that this should be the case. We are and will continue to grow profitable market share as our growth strategies are working.

As always, thanks to all our DXP people, customers, suppliers, and shareholders for their continued support. I believe that 2010 was the start of a new growth cycle for DXP, and we all look forward to a great 2011 and beyond.

We are now open for questions.

Thank you, sir. We will now begin the question-and-answer session. (Operator Instructions) Matt Duncan, Stephens Inc.

Good afternoon, guys, and congrats on a great quarter.

Thanks, Matt.

The first question I've got is with regard to supply chain services. And David, you gave us a lot of detail here, and I appreciate that. It was especially encouraging to see those sales grow. If memory serves me correctly, this is the first quarterly growth you've had there in about 3 years. So, can you talk a little bit about what else John and his team have done to turn that business around? What's different there today versus a year ago about the way you guys are approaching the supply chain services business?

You're sure being hard on me, but I think you're right. John, who previously was over at the service center sector and I asked to go get his arms around SCS, has really done a really great job of not only keeping a lot of the really good people up in Omaha that -- from an operations point of view and also the sales people, but I think significantly John buys into the fact that DXP is customer-driven. And so, instead of dictating to the customer how things are going to be, we find out what it is that they want us -- what do they want us to be for them.

And he's renegotiated existing contracts, so we don't lose them. And that was his first priority, was to stop the bleeding, stop the loss of business. And then, from there, we've gone out, and we offer a program that is a little more defined around having better hooks in -- and I say hooks, but that's not really a good term. What I should have said was offering value-added services to the customer that they value, instead of just having a simple procurement model.

And so, I think that's going to -- that's not only helped us win business, but it's also going to help us keep business because if all we're doing is buying from them, well then they can change you out pretty quickly and give the business to somebody else. And so, that was never DXP's strategy, but it was Precision's strategy back when they were running things.

So, I think we're adding more value. We're being more selective in terms of the type of customer, the size of the customer. We're going after little smaller deals, and -- where we're appreciated. And he's done a really nice job of just simply stopping the bleeding, and then now we're starting to grow the business. So, we'll look for really pretty exciting things to happen at SCS.

Okay, good.

So, the new agreement that you mentioned that you've added this quarter; relative in size to the one on the food and beverage side you said that you had lost or are the new agreements going to add more than you're losing with those food and beverage agreements that went away?

Yes.

Okay.

Well, they -- and certainly long term, but we feel pretty strongly that we're going to have quarter-to-quarter increases.

Okay.

On the innovative pumping solutions side, it sounds like the sequential down tick in sales there is really just a timing and lumpiness of that business. Is that really the right way to think about it?

Yes. Yes, their -- no, their activity is very robust, both now offshore and onshore, and the only segment -- during our heyday, I mean, just to give people an idea, we were doing about $22 million in mid-market -- midstream pipeline type pump business. And today, that business is about $7 million. And so, that particular area is not performing as well as in the past, but everything else is really doing really, really well.

Okay.

Month-to-month trends throughout the quarter, was there any noticeable trends in terms of your sales performance each sequential month through the quarter and into April?

I mean, sales per day, per business day, went up each --.

-- Each month --.

-- Each month in the quarter.

Okay.

Did that continue, Mac, into April?

No. We're very, very pleased with April. April was significantly higher than January and February, but, for whatever reason, March has an awful lot of days in there. And then, for some reason, we seem to always have a really nice March. So, it's not quite as good as March, but substantially better than January and February.

Okay, that's helpful.

On the Southeast US expansion, can you talk a bit about the impact it had on the quarter, both from a revenue and operating income perspective?

The -- I was still looking at the numbers you were talking about before. Are you asking about the new South Atlantic region?

Yes.

I guess the sales were, I think, a million -- they were right on budget for sales. The sales were slight -- $25,000 or so higher than budget. They actually probably lost close to $40,000 or $50,000 more than they had projected. But, I mean, in general terms, they're pretty much on budget.

And then, what were the numbers, Mac, in terms of both revenues and the operating loss?

The revenues were $1.1 million and the loss was $280,000.

Okay.

All right, and then the last thing I've got, and I'll jump back in the queue, is in terms of pricing, what do you guys seeing in terms of year-over-year increases in pricing, and how do you feel like that impacted your revenues in the quarter versus the first quarter of last year?

Pricing from our manufacturers?

No, your own pricing. So, if you look at your revenues, what type of impact do you think price had on your revenue growth year over year?

Well, I guess, we -- I asked that question a little while ago, and our general thoughts are that inflation for us in our product index is about 4%. So, I guess 4% of our sales growth compared to a year ago is probably due to inflation.

But, I'll just add that that 4% is -- much pretty comes at the first of the year, and then the manufacturers, in theory, would only have another price increase if their cost of producing product, either in commodities or labor, dictated that. And so, I don't see that coming. I think most of them would agree with that.

So, I can't think -- you can't look at the first quarter and say -- well, 4% of the increase was due to that 4%. But, overall for the year, I think you probably could look at it and say -- well, okay, sales increased 4% for the year, by about 4%.

Okay, that's helpful, David. Thanks, guys. Nice quarter.

Thank you.

Holden Lewis, BB&T.

I wanted to -- you mentioned a lot about the energy market coming back and that sort of thing. And I was wondering, can you give a little, maybe, update on how you see your end markets and how much of your end markets now are energy versus food and beverage? And I just wanted to get a feel for where you think you are with that mix.

Well, I just got an update on that. And I have that somewhere, but it's not right in front of me. Can I send you that? I still think oil and gas is about 30%, and then we have about 20 other categories that -- and we really went through a big exercise to dissect our business, and we picked 20 categories, and so we have that detail. Unfortunately, I'm not looking at that e-mail right now.

And obviously, IPS is essentially all energy, but, I mean, is -- so if it's 30% give or take for the company as a whole, does that mean that it's less than that for MRO and less than for SCS? I mean, where does energy fall in for those two businesses, again in general terms?

Well, supply chain services is finally -- has a significant new contract being implemented throughout the year that -- this is their first oil and gas customer, really. So, the rest of it comes from the service center sector, and Mac was quick enough here to -- on his iPhone to pull up this e-mail that I was supposed to be looking at. And it says oil and gas around 20 -- it's actually 26%, food and beverage is 15%, general industry is 12%, chemical is 9.5%.

We actually have a surprise sector here -- I didn't realize this until we did all this hard work -- is we actually have 9.2% of our business is to resellers, 8.3% to transportation, 3.6% to power, 3.4% to mining, 3.1% to other fabricators and construction, 2.9% to agriculture, 2.5% to refineries, etc.

Okay.

And where are you continuing to see acceleration? It sounds like you think that oil and gas isn't just stable here, but continuing to accelerate. Is that also true for the chemicals and refineries and -- I guess I'm just trying to get a sense, do you still -- particularly where MRO is concerned, I guess. I mean, do you still see your businesses accelerating at this point or are they just stabilizing?

No, we actually feel pretty strong that our markets are continuing to accelerate. Now, I don't know if that's double digit or 5% or what, but they're -- but we feel pretty -- we feel good that they're growing.

Okay.

Exceptions might be we have a very small sector -- we have 1% in military and 0.6% in municipal. Those will probably -- pulling back.

Okay.

Going back to what Mac was talking about with the SCS, there's one thing, I guess, I'm trying to get a sense for. There's so moving pieces that you mentioned, right; implemented two stores in Q4, but I think you also said two new stores in Q1 '11 and two more procurement agreements in Q1 '11, re-signed two agreements, each one could double the ultimate take, signed this agreement with [US hold] services -- I know it's got to get implemented and that takes a little bit of time. But, I guess what I'm trying to get a sense for is with all these new moving pieces, plus the one that walked out -- the one that's walking out, where would you envision -- if these things were implemented and running at full levels, what would be the annual run rate of revenues with this stuff coming in and the one thing going out? And I guess, also, where do you think you're going to exit Q4 at?

I think if everything goes according to plan, we should see a year-over-year increase in SCS of around 20%.

Okay.

But, you had envisioned that, again -- I mean, the rate these things are coming along, you would expect each quarter to see revenues increasing in that business or is the timing of this one walking away and these others coming on, was there short term -- it's just such a lumpy business that's not necessarily economic -- I'm trying to get a sense of how we should be looking at this.

All right. The business walking away is -- and it does walk away quicker -- is about $6 million, and the business we're adding is in the 10s of millions. So, it's -- we're going to have a net plus.

Now, if it was any one quarter, maybe the second quarter -- the contract doesn't go away until, by the way, the end of May. So, we may not see much difference in the second quarter because we're not going to lose but one month, and we're adding a lot. And so, I think we're sequentially going to see SCS move forward each quarter.

Okay. No, that's helpful.

And then, in terms of this contract just walking away, is there some provision in that contract where they have to pay for the inventory there for holdings, that you get this one-time balloon payment that flows through the P&L?

Yes.

Yes, but they won't be significant. The balloon part won't be there.

Yes, it's about $700,000.

Okay, so that's all. Okay.

And then, I wanted -- I guess, when I think about what my 2011 model might look like, 2011 is playing out to look a lot like 2008, which means that we're back at the level you were at before everything started heading south. And I guess given what --.

-- And we're, like -- let's celebrate. Should I break out the pink champagne already or what?

I don't know, a lost 2 years is nothing to celebrate, I suppose, but that -- but what I'm curious about is now that we're reset, if you will, what are the expectations -- I don't know if it's, like, a 3-year plan or 5-year plan or just these general objectives. Where -- how do you see the margins playing out in the next few years and the revenue levels? How should we be looking at your more intermediate or longer-term goals from here?

By the end of 2013, we're going to be at $1 billion and EBITDA is going to be 10%.

Okay.

Any color on exactly how you achieve that?

Yes, it's going to be organic growth of 10% plus, and the rest is going to be through acquisitions. And of course, with EBITDA growing and stuff like that, we hope to be able to fund those acquisitions without diluting shareholders.

Okay.

And that margin improvement, the EBITDA margin improvement, how much do you see on the gross margin line for that? I mean, gross margin's been pretty stable. It hasn't made a lot of movement. I mean, are you're envisioning getting most of that off of SG&A because you're also investing pretty heavily at the SG&A level? So, I mean, how do you get to that significant increase in the margin?

30% gross profit margins and 20% SG&A.

(Operator Instructions) Joe Mondillo, Sidoti & Co.

Just to clear up -- just to go back to the SCS business. So, you're losing a customer at $6 million a quarter and you're gaining a customer --.

-- No, not per quarter.

Per year?

Yes, per year.

Per year, okay.

Annual number.

All right.

So, you -- all right. Then, you've said that your looking at that business growing 20% for the year, so that would mean you have to grow -- I mean, if it's going to grow sequentially for the next few quarters throughout the year, you're looking at that business to grow up to maybe a $40 million-plus run rate on a quarterly basis. Is that correct?

Yes.

Okay.

Could you also tell me what the effect of acquisitions were again on a year-over-year and sequential basis? I think I missed that.

You're talking about sales?

Yes, total sales.

In the first quarter, sales of D&F and Quadna were $18.7 million.

Okay.

When comparing to the fourth quarter, D&F sales were about $6.3 million for the quarter, and so I tried to take two-thirds of that, 2 months, and back it out to compare to the fourth quarter, where we -- for 1 month.

Sure, good enough.

And then, looking at the gross margin at the service center business, how did that trend from fourth quarter to first quarter? How does that look?

It was down slightly, and we really attributed that to the fact that what's really picked up, which was really hurting, I guess, first, was that our OEMs that manufacture oil field type equipment were -- suffered pretty severely in '09 and started coming back in '10. And now, they're really -- they're going full-steam ahead. So, the OEM business, instead of the just-in-time business for other type of customers or end users, is the lower-margin business.

Okay, makes sense.

And then, just in terms of the IPS, what kind of lead times generally do you see in that business?

Well --.

-- Or how far out is your visibility, I guess, I'm trying to determine?

Yes, they're -- actually our backlog today already goes into 2012.

Okay.

And a majority of that -- would you say your general majority visibility goes out 6 months, 9 months --?

-- No, it's a year.

It's a year?

Well, it's -- okay. I mean, jobs can take a year. But, we may get a job today that still ships this year. So, I -- it's not all -- like, if we got another $1 million job today, it wouldn't necessarily not ship this year. It might not ship this year, but -- so I would -- maybe we need to take that down to a 9-month type --.

-- Okay.

It sounds like you have a pretty good idea of what the year is looking like, though?

Yes.

Matt Duncan, Stephens Inc.

So, David, following up on that last question on innovative pumping solutions, do you have a view as to what you think your revenues can be in that segment this year with visibility that sounds like you've got pretty much good visibility for the rest of this year?

Yes. I forgot what I needed to [listen] to, but --.

-- Well, I mean, I think, in general, our goal is to get to -- have a $100 million of IPS revenues in 2011.

Right.

And it sounds like, Mac, that's going to be more 3Q, 4Q loaded, and it probably bounces a little bit into 2Q, but it's a little more backend loaded just in the timing of shipments, I would assume?

Yes. And a lot -- I mean, a lot of that we already have orders for, and a lot of it we don't have orders for yet. But, we think -- because there is a variance. I mean, there are things that we get the order a year before they ship. So, there are some things that come in, and we ship them in a matter of months.

Yes, of course --.

-- Smaller things.

Okay.

On Quadna and D&F, what was the EPS contribution from those two? Were they accretive to earnings this quarter, and if so, by how much?

They were both accretive, and it's -- together they're in the range of $0.04 to $0.05.

Okay.

And then, last thing I've got is on acquisitions. David, I know you always keep an eye out for nice companies you can add to the DXP family. How does the acquisition pipeline look right now, and when do you think you might be able to close your next acquisition?

Well, the pipeline's good. We haven't -- we really don't have anything that is in a letter of intent type situation really right now. But, we have quite a few deals that we're working on that all want to get closed this year. So, I feel good about the acquisition front.

And I know in the past your goal has been 10% organic revenue growth and another 10% from acquisitions. Is that still the way you're thinking about how you get to $1 billion in 2013?

Well, as you know, we hired Kent Yee, and, of course, he would like to over time increase that. But, that's probably good for this year.

And ladies and gentlemen, that does conclude our conference for today. I'd like to thank you for your participation. You may now disconnect.