|
[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934. For the quarterly period ended June 30,
2009
|
|
[ ]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
|
For
the transition period from
|
to
|
Texas
|
76-0509661
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification Number)
|
|
7272
Pinemont, Houston, Texas 77040
|
(713)
996-4700
|
|
(Address
of principal executive offices)
|
Registrant’s
telephone number, including area
code.
|
DXP
ENTERPRISES, INC., AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(In
Thousands, Except Share and Per Share Amounts)
|
|||
June
30, 2009
|
December
31, 2008
|
||
ASSETS
|
(unaudited)
|
||
Current
assets:
|
|||
Cash
|
$ 2,470
|
$ 5,698
|
|
Trade
accounts receivable, net of allowances for doubtful
accounts
|
|||
of
$3,710 in 2009 and $3,494 in 2008
|
77,851
|
101,191
|
|
Inventories,
net
|
102,876
|
119,097
|
|
Prepaid
expenses and other current assets
|
3,763
|
2,851
|
|
Deferred
income taxes
|
5,903
|
3,863
|
|
Total
current assets
|
192,863
|
232,700
|
|
Property
and equipment, net
|
19,422
|
20,331
|
|
Goodwill
|
100,001
|
98,718
|
|
Other
intangibles, net of accumulated amortization of $13,218 in
2009
and
$9,605 in 2008
|
41,614
|
45,227
|
|
Other
assets
|
707
|
880
|
|
Total
assets
|
$ 354,607
|
$ 397,856
|
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|||
Current
liabilities:
|
|||
Current
portion of long-term debt
|
$ 13,817
|
$ 13,965
|
|
Trade
accounts payable
|
42,038
|
57,539
|
|
Accrued
wages and benefits
|
8,761
|
12,869
|
|
Customer
advances
|
2,119
|
2,719
|
|
Federal
income taxes payable
|
5,198
|
7,894
|
|
Other
accrued liabilities
|
4,223
|
8,660
|
|
Total
current liabilities
|
76,156
|
103,646
|
|
Long-term
debt, less current portion
|
131,150
|
154,591
|
|
Deferred
income taxes
|
11,004
|
9,419
|
|
Other
liabilities
|
12
|
12
|
|
Shareholders’
equity:
|
|||
Series
A preferred stock, 1/10th
vote per share; $1.00 par value;
liquidation
preference of $100 per share ($112 at June 30, 2009);
1,000,000
shares authorized; 1,122 shares issued and outstanding
|
1
|
1
|
|
Series
B convertible preferred stock, 1/10th
vote per share; $1.00
par
value; $100 stated value; liquidation preference of $100 per
share
($1,500 at June 30, 2009); 1,000,000 shares
authorized;
15,000 shares
issued and outstanding
|
15
|
15
|
|
Common
stock, $0.01 par value, 100,000,000 shares authorized;
12,869,746
in 2009 and 12,863,304 in 2008 shares outstanding
|
128
|
128
|
|
Paid-in
capital
|
56,744
|
56,206
|
|
Retained
earnings
|
79,858
|
74,559
|
|
Accumulated
other comprehensive income (loss)
|
(461)
|
(721)
|
|
Total
shareholders’ equity
|
136,285
|
130,188
|
|
Total
liabilities and shareholders’ equity
|
$ 354,607
|
$ 397,856
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
|
Three
Months Ended
|
Six
Months Ended
|
||||||
June
30,
|
June
30,
|
||||||
2009
|
2008
(Restated)
|
2009
|
2008
(Restated)
|
||||
Sales
|
$ 144,374
|
$ 187,802
|
$ 301,978
|
$ 356,301
|
|||
Cost
of sales
|
102,990
|
135,926
|
214,520
|
258,479
|
|||
Gross
profit
|
41,384
|
51,876
|
87,458
|
97,822
|
|||
Selling,
general and
administrative
expense
|
36,263
|
40,391
|
75,645
|
75,769
|
|||
Operating
income
|
5,121
|
11,485
|
11,813
|
22,053
|
|||
Other
income
|
48
|
27
|
62
|
40
|
|||
Interest
expense
|
(1,335)
|
(1,176)
|
(2,788)
|
(2,559)
|
|||
Income
before income taxes
|
3,834
|
10,336
|
9,087
|
19,534
|
|||
Provision
for income taxes
|
1,668
|
3,963
|
3,749
|
7,722
|
|||
Net
income
|
2,166
|
6,373
|
5,338
|
11,812
|
|||
Preferred
stock dividend
|
(23)
|
(22)
|
(38)
|
(45)
|
|||
Net
income attributable to
common
shareholders
|
$ 2,143
|
$ 6,351
|
$ 5,300
|
$ 11,767
|
|||
Basic
income per share
|
$ 0.16
|
$ 0.49
|
$ 0.40
|
$ 0.92
|
|||
Weighted
average common
shares
outstanding
|
13,103
|
12,857
|
13,091
|
12,857
|
|||
Diluted
income per share
|
$ 0.15
|
$ 0.46
|
$ 0.38
|
$ 0.85
|
|||
Weighted
average common and common
equivalent
shares outstanding
|
13,977
|
13,837
|
13,965
|
13,837
|
|||
See
notes to condensed consolidated financial
statements.
|
SIX
MONTHS ENDED
|
|||
JUNE
30
|
|||
2009
|
2008
|
||
OPERATING
ACTIVITIES:
|
|||
Net
income
|
$ 5,338
|
$ 11,812
|
|
Adjustments
to reconcile net income to net cash provided
|
|||
by
operating activities – net of acquisitions
|
|||
Depreciation
|
2,187
|
2,036
|
|
Amortization
of intangibles
|
3,613
|
2,460
|
|
Compensation
expense from restricted stock
|
740
|
454
|
|
Tax
benefit related to vesting of restricted stock
|
23
|
-
|
|
Deferred
income taxes
|
(496)
|
(113)
|
|
Changes
in operating assets and liabilities, net of
assets
and liabilities acquired in business combinations:
|
|||
Trade
accounts receivable
|
23,340
|
(15,532)
|
|
Inventories
|
16,220
|
(312)
|
|
Prepaid
expenses and other current assets
|
(1,708)
|
(1,896)
|
|
Accounts
payable and accrued liabilities
|
(27,217)
|
6,500
|
|
Net
cash provided by operating activities
|
22,040
|
5,409
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||
Purchase
of property and equipment
|
(1,278)
|
(3,202)
|
|
Purchase
of businesses, net of cash acquired
|
(338)
|
(3,822)
|
|
Net
cash used in investing activities
|
(1,616)
|
(7,024)
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||
Proceeds
from debt
|
59,369
|
25,223
|
|
Principal
payments on revolving line of credit and other long-term
debt
|
(82,960)
|
(21,581)
|
|
Dividends
paid in cash
|
(38)
|
(45)
|
|
Tax
benefit related to vesting of restricted stock
|
(23)
|
-
|
|
Net
cash (used in) provided by financing activities
|
(23,652)
|
3,597
|
|
INCREASE
(DECREASE) IN CASH
|
(3,228)
|
1,982
|
|
CASH
AT BEGINNING OF PERIOD
|
5,698
|
3,978
|
|
CASH
AT END OF PERIOD
|
$ 2,470
|
$ 5,960
|
|
See
notes to condensed consolidated financial
statements.
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||
2009
|
2008
|
2009
|
2008
|
||||
Net
income
|
$2,166
|
$6,373
|
$5,338
|
$11,812
|
|||
Gain
(loss) from interest rate swap, net of income taxes
|
153
|
390
|
260
|
(210)
|
|||
Comprehensive
income
|
$2,319
|
$6,763
|
$5,598
|
$11,602
|
|||
See
notes to condensed consolidated financial
statements.
|
Options
Outstanding and Exercisable
|
|||||||
Number
of Shares
|
Weighted
Average
Exercise
Price
|
Weighted
Average Remaining Contractual Term
(in
years)
|
Aggregate
Intrinsic Value
|
||||
Options
outstanding
at
December 31, 2008
|
58,000
|
$ 2.33
|
4.5
|
$ 712,000
|
|||
Granted
|
-
|
||||||
Exercised
|
-
|
||||||
Options
outstanding and
exercisable
at June 30, 2009
|
58,000
|
$ 2.33
|
4.0
|
$ 530,000
|
Options
Outstanding and Exercisable
|
||||||
Range
of
exercise
prices
|
Number
of Options
Outstanding
|
Weighted
Average Remaining Contractual Life
(in
years)
|
Weighted
Average
Exercise
Price
|
|||
$1.25
|
18,000
|
0.8
|
$1.25
|
|||
$2.26
- $3.36
|
40,000
|
5.4
|
$2.81
|
|||
58,000
|
4.0
|
$2.33
|
Number
of shares authorized for grants
|
600,000
|
Number
of shares granted
|
345,038
|
Number
of shares forfeited
|
20,923
|
Number
of shares available for future grants
|
275,885
|
Weighted-average
grant price of granted shares
|
$ 15.89
|
Number
of
Shares
|
Weighted
Average
Grant
Price
|
||
Unvested
at December 31, 2008
|
215,250
|
$
15.91
|
|
Granted
|
39,016
|
$
16.87
|
|
Forfeited
|
(20,923)
|
$
12.76
|
|
Vested
|
(6,442)
|
$
10.31
|
|
Unvested
at June 30, 2009
|
226,901
|
$
16.52
|
June
30,
2009
|
December
31,
2008
|
||
Finished
goods
|
$ 101,959
|
$
117,582
|
|
Work
in process
|
917
|
1,515
|
|
Inventories
|
$ 102,876
|
$
119,097
|
Total
|
Goodwill
|
Other
Intangibles
|
|||
Balance
as of December 31, 2008
|
$ 143,945
|
$ 98,718
|
$ 45,227
|
||
Acquired
during the year
|
-
|
-
|
-
|
||
Adjustments
to prior year estimates
|
1,283
|
1,283
|
-
|
||
Amortization
|
(3,613)
|
-
|
(3,613)
|
||
Balance
as of June 30, 2009
|
$ 141,615
|
$ 100,001
|
$ 41,614
|
As
of June 30, 2009
|
As
of December 31, 2008
|
||||||
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
||||
Vendor
agreements
|
$ 2,496
|
$ (644)
|
$ 2,496
|
$ (582)
|
|||
Customer
relationships
|
50,416
|
(11,545)
|
50,416
|
(8,289)
|
|||
Non-compete
agreements
|
1,920
|
(1,029)
|
1,920
|
(734)
|
|||
Total
|
$ 54,832
|
$ (13,218)
|
$ 54,832
|
$ (9,605)
|
Three
Months Ended
|
Six
Months Ended
|
||||||
June
30
|
June
30
|
||||||
2009
|
2008
(Restated)
|
2009
|
2008
(Restated)
|
||||
Basic:
|
|||||||
Weighted
average shares outstanding
|
13,103,396
|
12,856,596
|
13,091,041
|
12,856,596
|
|||
Net
income
|
$ 2,166,000
|
$ 6,373,000
|
$ 5,338,000
|
$
11,812,000
|
|||
Convertible
preferred stock dividend
|
(23,000)
|
(22,000)
|
(38,000)
|
(45,000)
|
|||
Net
income attributable to
common
shareholders
|
$ 2,143,000
|
$ 6,351,000
|
$ 5,300,000
|
$
11,767,000
|
|||
Per
share amount
|
$ 0.16
|
$ 0.49
|
$ 0.40
|
$ 0.92
|
|||
Diluted:
|
|||||||
Weighted
average shares outstanding
|
13,103,396
|
12,856,596
|
13,091,041
|
12,856,596
|
|||
Net
effect of dilutive stock options –
based
on the treasury stock method
|
34,018
|
140,551
|
33,891
|
140,337
|
|||
Assumed
conversion of convertible
preferred
stock
|
840,000
|
840,000
|
840,000
|
840,000
|
|||
Total
|
13,977,414
|
13,837,147
|
13,964,932
|
13,836,933
|
|||
Net
income attributable to
common
shareholders
|
$ 2,143,000
|
$ 6,351,000
|
$ 5,300,000
|
$
11,767,000
|
|||
Convertible
preferred stock dividend
|
23,000
|
22,000
|
38,000
|
45,000
|
|||
Net
income for diluted earnings per share
|
$ 2,166,000
|
$ 6,373,000
|
$ 5,338,000
|
$
11,812,000
|
|||
Per
share amount
|
$ 0.15
|
$ 0.46
|
$ 0.38
|
$ 0.85
|
Three
Months ended June 30,
|
Six
Months ended June 30,
|
||||||||||
MRO
|
Electrical
Contractor
|
Total
|
MRO
|
Electrical
Contractor
|
Total
|
||||||
2008
|
|||||||||||
Sales
|
$ 186,823
|
$ 979
|
$ 187,802
|
$ 354,419
|
$ 1,882
|
$ 356,301
|
|||||
Operating
income
|
11,315
|
170
|
11,485
|
21,742
|
311
|
22,053
|
|||||
Income
before taxes
|
10,199
|
137
|
10,336
|
19,286
|
248
|
19,534
|
|||||
2009
|
|||||||||||
Sales
|
$ 143,666
|
$ 708
|
$ 144,374
|
$ 300,585
|
$ 1,393
|
$ 301,978
|
|||||
Operating
income
|
5,049
|
72
|
5,121
|
11,678
|
135
|
11,813
|
|||||
Income
before taxes
|
3,791
|
43
|
3,834
|
9,013
|
74
|
9,087
|
NOTE
9:
|
ACQUISITIONS
|
Accounts
Receivable
|
$ 9,210
|
Inventory
|
24,422
|
Property
and equipment
|
2,625
|
Goodwill
and intangibles
|
44,657
|
Other
assets
|
274
|
Assets
acquired
|
81,188
|
Current
liabilities assumed
|
(5,165)
|
Non-current
liabilities assumed
|
(5,759)
|
Net
assets acquired
|
$ 70,264
|
Three
Months Ended
June
30, 2008
|
Six
Months
Ended
June
30, 2008
|
|
Net
sales
|
$ 208,657
|
$ 398,915
|
Net
income
|
6,993
|
13,366
|
Per
share data
|
||
Basic
earnings
|
$0.54
|
$1.04
|
Diluted
earnings
|
$0.51
|
$0.97
|
Fair Value Measurement
|
|||||||
Description
(Liabilities)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Current
liabilities -
other accrued liabilities
|
$ -
|
|
$ -
|
|
$ 768
|
|
$ 768
|
Non-current
liabilities
|
-
|
|
-
|
-
|
-
|
||
Total
|
$ -
|
|
$ -
|
|
$ 768
|
|
$ 768
|
Interest
Rate Swap
|
|||
2009
|
2008
|
||
Three
Months Ended June 30
|
|||
Fair
value at April 1
|
$ 1,023
|
$ 1,000
|
|
Realized
and unrealized (gains) losses
included
in other comprehensive income
|
(255)
|
(650)
|
|
Fair
value at June 30
|
$ 768
|
$ 350
|
|
Six
Months Ended June 30
|
|||
Fair
value at January 1
|
$ 1,202
|
$ -
|
|
Realized
and unrealized (gains) losses
included
in other comprehensive income
|
(434)
|
350
|
|
Fair
value at June 30
|
$ 768
|
$ 350
|
|
NOTE
11: OTHER COMPREHENSIVE
INCOME
|
Three
Months Ended
June
30
|
Six
Months Ended
June
30
|
||||||
2009
|
2008
|
2009
|
2008
|
||||
Net
income
|
$2,166
|
|
$6,373
|
$5,338
|
$11,812
|
||
Gain
(loss) from interest rate swap, net of income taxes
|
153
|
390
|
260
|
(210)
|
|||
Other
comprehensive income
|
$2,319
|
|
$6,763
|
$5,598
|
$11,602
|
|
ITEM
2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
|
|
Impact
of Current Economic Conditions
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||||||||||
2009
|
%
|
2008
|
%
|
2009
|
%
|
2008
|
%
|
||||||||
(in
thousands, except percentages and per share amounts)
|
|||||||||||||||
Sales
|
$144,374
|
100.0
|
$187,802
|
100.0
|
$301,978
|
100.0
|
$356,301
|
100.0
|
|||||||
Cost
of sales
|
102,990
|
71.3
|
135,926
|
72.4
|
214,520
|
71.0
|
258,479
|
72.5
|
|||||||
Gross
profit
|
41,384
|
28.7
|
51,876
|
27.6
|
87,458
|
29.0
|
97,822
|
27.5
|
|||||||
Selling,
general and
administrative
expense
|
36,263
|
25.1
|
40,391
|
21.5
|
75,645
|
25.1
|
75,769
|
21.3
|
|||||||
Operating
income
|
5,121
|
3.6
|
11,485
|
6.1
|
11,813
|
3.9
|
22,053
|
6.2
|
|||||||
Interest
expense
|
(1,335)
|
(0.9)
|
(1,176)
|
(0.6)
|
(2,788)
|
(0.9)
|
(2,559)
|
(0.7)
|
|||||||
Other
income
|
48
|
-
|
27
|
-
|
62
|
-
|
40
|
-
|
|||||||
Income
before
income
taxes
|
3,834
|
2.7
|
10,336
|
5.5
|
9,087
|
3.0
|
19,534
|
5.5
|
|||||||
Provision
for
income
taxes
|
1,668
|
1.2
|
3,963
|
2.1
|
3,749
|
1.2
|
7,722
|
2.2
|
|||||||
Net
income
|
$ 2,166
|
1.5
|
$ 6,3733
|
3.4
|
$ 5,338
|
1.8
|
11,812
|
3.3
|
|||||||
Per
share amounts
|
|||||||||||||||
Basic
earnings
per
share
|
$0.16
|
$0.49
|
$0.41
|
$0.92
|
|||||||||||
Diluted
earnings
per
share
|
$0.16
|
$0.46
|
$0.38
|
$0.85
|
June
30,
2009
|
December
31, 2008
|
Increase
(Decrease)
|
|||
(in
Thousands)
|
|||||
Current
portion of long-term debt
|
$ 13,817
|
$ 13,965
|
$ (148)
|
||
Long-term
debt, less current portion
|
131,150
|
154,591
|
(23,441)
|
||
Total
long-term debt
|
$ 144,967
|
$ 168,556
|
$ (23,589)
(2)
|
||
Amount
available
|
$ 36,239(1)
|
$ 36,951(1)
|
$ (712)
(3)
|
June
30, 2009
|
Increase
|
||||
2009
|
2008
|
(Decrease)
|
|||
Days
of sales outstanding (in
days)
|
49.0
|
50.6
|
(1.6)
|
||
Inventory
turns
|
4.2
|
5.9
|
(1.7)
|
Accounts
Receivable
|
$ 9,210
|
Inventory
|
24,422
|
Property
and equipment
|
2,625
|
Goodwill
and intangibles
|
44,657
|
Other
assets
|
274
|
Assets
acquired
|
81,188
|
Current
liabilities assumed
|
(5,165)
|
Non-current
liabilities assumed
|
(5,759)
|
Net
assets acquired
|
$ 70,264
|
Three
Months
Ended
June
30, 2008
|
Six
Months
Ended
June
30, 2008
|
|||
Net
sales
|
$ 208,657
|
$ 398,915
|
||
Net
income
|
6,993
|
13,366
|
||
Per
share data
|
||||
Basic
earnings
|
$0.54
|
$1.04
|
||
Diluted
|
$0.51
|
$0.97
|
Shares/Votes
Voted
For
|
Shares/Votes
Withheld
|
|
David
Little
|
11,720,858
|
155,726
|
Cletus
Davis
|
11,741,779
|
134,805
|
Timothy
P. Halter
|
11,711,103
|
165,481
|
Kenneth
H. Miller
|
11,618,811
|
257,773
|
Charles
R. Strader
|
11,284,361
|
592,223
|
3.1
|
Restated
Articles of Incorporation, as amended (incorporated by reference to
Exhibit 4.1 to the Company’s Registration Statement on Form S-8 (Reg. No.
333-61953), filed with the Securities and Exchange Commission on August
20, 1998).
|
3.2
|
Bylaws
(incorporated by reference to Exhibit 3.2 to the Company’s Registration
Statement on Form S-4 (Reg. No. 333-10021), filed with the Securities and
Exchange Commission on August 12,
1996).
|
10.1
|
Amendment
No. Two to Employment Agreement dated effective as of January 1, 2004
(incorporated by reference to the Company’s Current Report on Form 8-K
(Reg. No. 000-21513) filed with the Securities and Exchange Commission on
May 22, 2009.
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) and rule 15d-14(a)
of the Securities Exchange Act, as amended. (Filed
herewith).
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) and rule 15d-14(a)
of the Securities Exchange Act, as amended. (Filed
herewith).
|
32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed
herewith).
|
32.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed
herewith).
|