David Little - Chief Executive Officer Mac McConnell - Senior Vice President, Finance and Chief Financial Officer.

Matt Duncan - Stephens Incorporated Joe Mondillo - Sidoti & Company.

Good day and welcome to the DXP Enterprises Incorporated Fourth Quarter Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mac McConnell, Senior Vice President of Finance and Chief Financial Officer. 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 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 might 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 2014 results. David Little will share his thoughts regarding the quarter’s results, then we will be happy to answer questions. During the fourth quarter of 2014, DXP performed its annual goodwill impairment tests for each of our reporting units.

As a result of this test, DXP determined a pre-tax $117.6 million write-down of B27 and Natpro goodwill was required. After-tax, this charge was $102 million or $6.66 per share. Additionally, during the fourth quarter, DXP finalized the purchase accounting for customer relationships for B27 and amortized these relationships on an accelerated basis.

This revision increased 2014 amortization expense by $4 million or $1 million per quarter. The first three quarters of 2014 have been revised to reflect this increased amortization expense in each quarter. This revision will result in 2015 and 2016 amortization expense being $3.5 million and $2.8 million greater than before the revision respectively.

Sales for the fourth quarter increased 21.9% to $382.5 million from the fourth quarter of 2013. After excluding fourth quarter 2014 sales of $51.1 million for businesses acquired, sales for the fourth quarter increased $17.7 million or 5.6% on a same-store sales basis.

Sales of Innovative Pumping Solutions products increased $35.5 million or 66.1% to $89.1 million compared to $53.6 million for the 2013 fourth quarter.

After excluding 2014 IPS segment sales of $30.59 million for B27, IPS segment sales for the fourth quarter of 2014 increased $4.5 million or 8.5% from the fourth quarter of 2013 on a same-store sales basis. This increase primarily resulted from continued demand from upstream production and midstream customers.

This fourth quarter organic sales increase of 8.5% is better than the 2014 annual organic growth rate for IPS of 3.9%. Sales by our Service Center segment increased $28.2 million or 12.6% to $252.5 million compared to $224.3 million of sales for the fourth quarter of 2013.

After excluding 2014 Service Center segment sales of $20.1 million for businesses acquired, Service Center segment sales for the fourth quarter of 2014 increased $8 million or 3.6% from the fourth quarter of 2013 on a same-store sales basis.

This sales increase is primarily the result of increased sales of cutting tools and safety suppliers and services. The fourth quarter organic sales increase of 3.6% is better than the 2014 annual organic increase of 2.5%. Sales for Supply Chain Services increased $5.1 million or 14.2% to $41 million, compared to $35.9 million for 2013 fourth quarter.

The increase in sales is primarily related to increased sales to new and existing customers serving the automotive, oil and gas, mining and general manufacturing markets. The fourth quarter organic sales increase of 14.2% is better than the 2014 annual organic increase of 11.2%.

When compared to the third quarter of 2014, sales for the fourth quarter of 2014 decreased $4.6 million or 1.2%. This 1.2% decline is less than the 3.1% fewer days in the fourth quarter than in the third quarter. Sales per business day in the fourth quarter increased 2% over the third quarter.

Fourth quarter 2014 sales of Innovative Pumping Solutions products increased $450,000 or 50 basis points compared to the third quarter of 2014. Sales per business day increased 3.7%. This increase is primarily resulted from continuing demand from our upstream production and midstream customers.

Fourth quarter 2014 sales by our Service Centers segment decreased $2.6 million or 1%, compared to the – to the third quarter of 2014. Sales per business day increased 2.2%. Fourth quarter 2014 sales for supply chain services decreased $2.4 million or 5.6% compared to the third quarter of 2014.

The decrease in sales is primarily the result of 3.1% fewer business days in the fourth quarter combined with several customers that closed for a week for the holidays in December. Gross profit as a percentage of sales for the fourth quarter of 2014 decreased to 27.9% from 30.2% for the fourth quarter of 2013.

This decrease was primarily the result of decreases in the gross profit percentage for each of the three segments. For Service Centers the decline in gross profit percentage is primarily the result of the decline in sales of higher-margin safety services work and equipment rentals primarily related to work over rigs in the U.S.

and drilling and well completions in Canada. This decline in sales of safety services and equipment rentals to the upstream oil and gas industry was offset with increased sales of lower margins safety products to industrial customers, which contributed to the decline in gross profit margin.

The decline in the gross profit percentage for the IPS segment is the result of three orders with lower than normal margins being completed in the fourth quarter. The decline in the supply chain gross profit percentage resulted from a change in the product mix to our customers.

SG&A for the fourth quarter of 2014 increased $14.5 million or 21.8% from the fourth quarter of 2013 compared to the 21.9% sales increase. This increase is partially the result of $8.1 million of SG&A expenses associated with acquisitions completed during 2014. As a percent of sales, SG&A was consistent with the fourth quarter of 2013.

Excluding the effect of the $2.8 million reversal of the Natpro earn out in 2013 and expenses from businesses acquired on a same store sales basis SG&A increased by 5.5%. This increase is primarily related to the 5.6% organic increase in sales. SG&A for the fourth quarter of 2014 decreased $1.5 million or 1.9% from the third quarter of 2014.

As a percentage of sales, SG&A decreased to 21.2% from 21.3% for the third quarter of 2014. The decline in SG&A is partially the result of the 1.1% decline in sales in the fourth quarter from the third quarter.

Corporate SG&A for the fourth quarter of 2014 decreased $1.6 million or 12.2% from the fourth quarter of 2013 and decreased $300,000 or 2.8% from the third quarter of 2014.

The decrease is partially resulted from decreases in incentive compensation in connection with lower pretax income and on comparison to the fourth quarter of 2014 due to the fourth quarter of 2013, including $1 million of B27 acquisition expenses. Interest expense for the fourth quarter of 2014 increased 117% from the fourth quarter of 2013.

This increase was primarily due to the increased borrowings to fund 2014 acquisitions. The increased borrowings also increased the interest rate on our borrowings compared to the fourth quarter of 2013. Interest expense for the fourth quarter decreased 11.1% from the third quarter of 2014.

This decrease was primarily due to a reduction in the average debt balance between the two periods. Total long-term debt decreased approximately $38.1 million during the fourth quarter despite spending $5.1 million of cash on treasury stock and $3 million of cash on purchase of fixed assets during the quarter.

In fact, we reduced debt by $80.3 million during the second half of 2014. Total long-term debt was $411.5 million at December 31, 2014. At December 31, 2014, the amount available to be borrowed under our credit facility was approximately $51 million and our bank leverage ratio was 2.9 to 1.

At December 31, our borrowings under the credit facility were at an average interest rate of approximately 2.2%. Cash on the balance sheet at December 31 was $47,000. The December 31, 2014 accounts receivable balance was $239.2 million. The inventory balance was $115.7 million at December 31. Now, I would like to turn the call over to David Little..

onshore upstream drilling and development, onshore upstream completion, onshore upstream production, midstream downstream refining, downstream petrochemical, offshore upstream drilling development and completion, offshore upstream production, engineering and construction upstream, engineering and construction midstream, engineering and construction downstream, chemical, building products, food and beverage, transportation, telecommunications, automotive, mining, sanitary, steel, resellers, military, agricultural, municipal, power, pharmaceutical, alternative energy, aggregates, pulp and paper, wood products, and other industrials.

To give everyone some highlights, onshore upstream production is our largest category at 22% and DXP feels that this market will be flat. Onshore midstream at 17% is our next largest market and we feel that this market will be flat. Third largest is onshore upstream drilling and development at 8.7% of our business and it will be down.

Fourth at 4.8% is onshore upstream completion and it will be down. Food and beverage at 4.7% is our fifth largest and it should be up. Chemical at 3.9% is the sixth largest and it should be up. Offshore drilling, development and completion at 3.3% will be down. Onshore downstream petrochemical at 3.1% should be up.

Onshore downstream refineries at 2.6% should be up. Engineering and construction upstream at 2% could be down. Engineering and construction midstream at 1.1%, our best guess is flat. Offshore upstream production at 0.6% could be up. Engineering and construction downstream at 0.5% should be up.

I am grouping everything else as industrial and it should be up with some more than others. This is not perfect as some customers are hard to breakdown into just one category. So, we dove deeper into the orders and did the best we could. The point is to manage our resources the best we can and to make smart business decisions on people investments.

We also broke this data down by segments and compared this to our salesmen’s forecast for a sanity check.

As you know, we do not give forecast, but organic growth, which comes from price increases, the economy and market share gains, should be up for our industrial business and slightly down for oil and gas business with midstream and production being okay and drilling development and completions being down.

We will continue to grow through market share gains and profitable acquisitions. And since earnings per share, is meaningless for an acquisition growth company, DXP will focus on growing cash flow, sales, and EBITDA. We are now open for questions..

Thank you. [Operator Instructions] And we will go first to Matt Duncan with Stephens Incorporated..

Hi, guys..

Hi, Matt..

So, David, you went through a lot of detail there and that was very helpful for the better understanding where the exposure is. And I think what we are all probably going to be try and get – we ultimately get at here is when we aggregate all that.

Do you feel like the business is going to be up or down this year? And when you look at maybe the easiest way to do this is to lump it into the three buckets from the press release, 19% is for upstream oil and gas, that’s clearly going to be down, 41% is a combination of production in midstream, depending on what production does this year that could be flat or I guess if we see a tail off in production in the back half, maybe there could be an impact, but it’s too early to tail, but the 40% industrial is going to up.

How do we think about how all that sort of come together? What do you expect to see happen to your sales and profits this year?.

Well, I am encouraged that I feel pretty strong that our profit margins should be okay. Our safety services, which is directly tied to drilling is going to – we have been asked to lower our prices 20% and so we have done so, so that we can grow market share at the expense of others.

But at the same time, we have asked which they expected was to take our labor cost down 20%, so that we will maintain our margin. So, the sales dollars will go down in that area, but we think our operating income as a percent of sales will be able to be maintained.

We have gone through all kinds of gyrations of saying okay, that business is going to be down 30%. This industrial business is going to be up 3% to 7%. This should be flat. This should be okay, could grow. Our backlog is pretty good.

And then I guess then the other question is just how long do oil prices stay depressed before they reach? They are not going back to 100, but they go back to something that makes everything a lot more normal.

And there are just so many variables there, but based on what our salesmen are forecasting and what they see and based on our own knowledge and then I think we really did a deep, deep dive into an analysis of the not only just the 31 markets, but how much do we participate in each one of those. And we don’t see it being that bad.

If I was guessing, I think most people are forecasting for us to be a little bit down. I hope that’s not the case and of course that could be offset by acquisitions, etcetera going forward, but if you want to just put your – put on my neck and hold me down to something that I think it’s a very small percentage down..

Okay.

And maybe I think the segment that we are probably all struggling with the most at least I know it seems to be the one at least clear to me is what happens with IPS this year, that business has gotten a lot of CapEx lean to it, but I understand it’s also got a lot of production and midstream lean to it, which seems to be a little bit safer although I am not sure those things will be growing much this year in terms of I don’t think there is going to be whole lot of investment in growing those, but you also had a pretty good backlog going into the year, what do you expect to happen to that segment in terms of revenue this year, will it be down in all likelihood and if so how much?.

Everything at B27, their Innovative Flow Solutions and their API-610 product is telling us that they are going to be – they are actually going to be up. And then and that partly because IFS really kind of had bad year last year and so this year they are feeling much, much better and stronger about what they are going to do..

And their backlog supports that so far, David?.

Yes. They have gotten – I have forgot what they told me is something like in the last 4 months orders that equal all of last year or something like that. I mean it’s – so it looks good, that might not be quite right, but it’s a very substantial increase in orders.

They – and then we continue to be successful with the API-610 product in midstream and so that’s still blowing and going.

The other part of the business entered the business with kind of more than half of the year made with backlog and then we continue to still get orders the HP Plus product is sold in saltwater injection and we are seeing these people that are producing X amount of oil today if they can grow it at all, they have to get rid of that water because when they are making that product, it comes with water and so they got to dispose of it.

So we are seeing a lot of activity in that area. So we just don’t see IPS catering and really in anyway. It should be okay..

Few more – two more things and I will hop back in queue. I heard you talk a lot about the margin question you saw in the quarter, but it also sounds like the mix is going to be lower margin at IPS this year.

The mix is probably going to be lower margin and Service Centers this year because the safety service business as I understand is the very high margin business and that’s going to be down, how do we think Mac about the gross margins going forward, most of the year was running up a little north of 29%, fourth quarter was 27.9%, but it also sounds like there was some stuff that may not repeat, so I am trying to think about how to put that all together in terms of what might happen with gross margins going forward?.

You asked Mac the question, but I would like to answer.

The fourth quarter had unusual gross margin events and we don’t necessarily see that happening, but on the other hand we do – we have to feel like that the industrial side that have margin pressure and in fact I think there is a lot that we need to do to raise margins on that particular side of the business.

And at the same time I think our oil and gas people are – there is bound to be some pressure there. And so I see it declining some, but I don’t see it – again I don’t see it falling off the table. The stuff we are doing now is we are not cutting the price..

But somewhere between the all-in and David it sounds like it’s somewhere between the low-29s and what you saw in the quarter, there is a lot of stuff that is going to repeat?.

I would pick 29 if I was guessing..

Okay. And then last thing just on M&A, one, how big is your appetite and two, how much you are going to be able to do, because I think the leverage ratio covenant is now 3.25 to 1, you are at 2.9. So, this is really kind of to a degree of function of what you expect your free cash flow to be? I know you guys target 10% top line growth through M&A.

Do you expect to be able to do that this year?.

I think we probably will not do that, not because I don’t believe we have the resources, because I think there is always ways of doing good deals.

But I think that there is enough uncertainty in the market that we certainly don’t want to catch a following night and so but that said metalworking is really moving forward quite nice and so is rotating equipment.

I am really – our long-term ability to put together a great rotating equipment company is just – is so exciting to be, I can’t tell you how exciting it is, because there is lot of people listening to this call, but it’s just really exciting to me. And of course, lot of things we are doing are really, really good.

And so – and then I think we will gain market share so that when things kind of turnaround from an oil and gas perspective that we are going to be so well positioned both in safety services and rotating equipment. And so, I am pretty pumped up about where we are headed.

So, then we should expect some acquisitions with a metalworking and rotating equipment focus, but you may not get to that 10% revenue growth through M&A number..

Got it. Very helpful. Thanks guys. Thanks for all the detail..

Sure..

And we will go next to Joe Mondillo with Sidoti & Company..

Hi, guys..

Hi, Joe..

So, in terms of I guess first I want to start with a follow-up on the B27, do you have any idea why B27 should be – is doing so much better over the last 4, 5 months given that it does have a pretty heavy exposure to oil and gas?.

We are simply not – the IPS doesn’t have anything to do with drilling. And so the rig count is way, way down and capital budgets are down, but they are not down on things that are going to produce more oil, they are down on drilling and finding new stuff.

And so we have a continuation, I think everybody has projected part of the problem of getting demand and supply back in shape is the fact that we are going to grow our production this year with CapEx budgets being down 30% to 50%.

And so I think you have to disconnect this from what is called CapEx, Apache cuts their budget, 40%, but it’s their drilling budget that they are cutting and we are not – IPS isn’t about drilling.

Now that said Joe, if we don’t get normalcy at some point in time, then the amount of drilling is not done will eventually show up, but it’s going to show up a year or two or three down the road. It isn’t going to show up today. It’s not going to show up in 2015..

So, the 19% that you cited that’s related to upstream that’s largely in the service center?.

Well, the 19% is drilling activity and it’s in the service center and it’s really pretty specific to our safety services business..

Okay. So expanding on the IPS segment, could you cite a percentage or where your backlog is compared to a year ago? I know you don’t want to give out the exact number what it is, but in terms of just the percentage comparison year-over-year..

Yes, it’s probably slightly up..

Okay.

And in terms of the orders in say the first two months of this year, are you seeing stable orders, are they in February did you start to see any pressure or is it pretty stable in terms of IPS orders in the first 2 months of the year?.

No, we are still getting our $5 million orders and smaller orders and things we are pretty consistent I think with what David was trying to say in Q1 that we expect our order intake to be good. We know….

So the orders that you are seeing in say the first 2 months of this year are sort of comparable to what you saw a year ago?.

Yes..

Okay..

Actually slightly better because of IFS, IFS is seeing....

So what is the biggest driver to that, is there infrastructure projects that are still needed to be billed out and is there a risk at a point, we get me to the mid part of the year and we have sort of built those out and given if oil prices sort of stay or remain where they are now, do we get to a point where maybe the orders start to catch up and you start to see pressure or how are you thinking about that part of the I guess the oil and gas sector?.

I think we are – I have to look at it this way. We did an analysis of all of the down oil cycles, bad supply and supply side and demand side. And almost every cycle we saw something in the neighborhood of a 50% swing in the price of oil.

Now we have never had anywhere close – during those cycles we look at our sales and they have never been down more than 5% except for 2009. 2009 was just an anomaly that we I don’t how to deal with that one, but anyway don’t give me another one of those. But so that’s part of it. But it also we know we were correct.

We know that if drilling goes down significantly we start feeling effects of that a year later. So basically oil started down in October and so somewhere if we don’t get back to something that’s normal, normal to me by the way is probably $70 a barrel then you are right, then the future in 2016 we could start seeing so, sales declined..

Okay.

In terms of the margin at IPS I know 2014 was sort of a mix type issue with some lower margin type mix with B27, which sort of pressured the margin if you compare it to 2013, but we have seen 2 years now with margins falling at that segment and in the fourth quarter I guess there were some sort of – some issues that depressed it to the sort of 12% levels, just wondering what your thoughts are on the margins that you are realizing in IPS in 30th year outlook or thoughts for 2015?.

Mac, why don’t you give me a minute, I am thinking that the first, second and third quarters, our margins at IPS were going up.

Am I correct?.

Yes..

Well, the first quarter I think it was pressured by the B27 that’s the quarter that you saw pretty depressed margins, but beside you are right – you are right the second and third quarter were up, but if you look at the overall year including the first quarter and including the fourth quarter the overall year margins were down and then so the recent – the most recent quarter was you said there was three orders in there that were lower than average margin, I guess let me ask it this way the orders that you are receiving lately, how are the margin profiles of those orders?.

There is only one reason – it was two reasons, two reasons for IPS those margins to fluctuate. One is that we simply have competition, we have got accounts and many, many, many times with our relationships etcetera. We are getting the last look. And so we decided to take something.

The other which we just not had for a long, long time is that the shop gets empty. And we have got a lot of talented people and we are better off taking a job to keep people busy and to make some money than to not make any money. But we haven’t had that environment for a long, long time.

And one of the orders that we got this past year that showed up in the fourth quarter was really on order we really weren’t doing a whole lot of fabrication to it. And we just took it because we didn’t want our competitor to get it, especially since the account was really the competitors’ account and we wanted to get stronger with that account.

So, because we were selling them HP Plus and some other things, so we wanted to – we just wanted to strengthen our position with that account. So, there is – it is not an exact science about our – I mean, we don’t go in and say okay, we are going to make 30% on every job we do and then we have this one cost a little more than we thought.

So, we only made 28 and the other one didn’t cost quite as much as we made and therefore we made 32. It truly is – every deal is different. So, it’s really, really hard to look at that. And here is another example of the API-610 stuff. We don’t make that higher margin, but it has very little low overhead, so they have 14%, 16% EBITDA margins.

So, we are happy with that when in fact their gross profit in the mix kind of brings it down. So, a little bit can be said about same thing with HP Plus, but it’s – I don’t think – I think the answer to your question is there is nothing about 15 that’s making us think that we are going to lose 4 points of margin.

That just doesn’t seem to be in the cards..

Okay. Let me just ask a follow-up to that then. In terms of pricing discipline, could you talk about that, because I am just – I have been trying to understand this for I guess a couple of years now.

Back in 2012 when your sales growth was you were seeing 60% sales growth obviously demand was going through the roof and there probably wasn’t a lot of capacity enough or at least enough capacity to meet the demand in the industry.

And so I am sure your pricing power was much better than maybe it was today, where you are seeing organic sales growth of modest single-digits.

So, how do you manage pricing discipline in a period where maybe you are seeing sort of stable, maybe a little bit of growth? And if we do see a sort of a softening say in the back of the year, how does that translate into the profits of that IPS business?.

So, we start off with the salesmen, who is working with the client to meet his needs and so they are helping design this modular system to make that happen. And then an application engineer gets involved and he starts putting the bid package together and there is – he is buying motors, he is buying engines, he is buying valves, he is buying piping.

And then we are estimating how long it takes us to build that by how many, as we got 2,000 hours on it and etcetera. So, there is a lot of moving parts. So, to the best of our knowledge then, we take and there are certain types of jobs that we know we have a very high probability of getting it, so we are going to – we try to make as much as we can.

Then there is other jobs that we are kind of on equal footing with other people. So, we try to bid that accordingly too. And we lose jobs, I mean, you are not loosing jobs, you are not pricing a project. So, it’s not an exact science, it’s just is not and but at the end of the day we make a really, really nice EBITDA margin.

And so I don’t know and if we make 16% EBITDA margin one year and we make 14% the next year. I am not going lose any sleep over there..

Okay, but it sounds like in the near-term margins could be comparable to what you – the 15% or what you saw in 2014?.

That’s right and you are correct though it if things get soft, then we will be – we will have more pressure on us to lower those margins. There is no question about that. But we are not seeing that yet..

Okay.

And in terms of acquisitions it sounds like you are going to continue to be involved this year can we expect…?.

Yes..

We should expect some in this year?.

Yes..

Okay. I will hop back in queue. Thanks a lot..

Alright..

[Operator Instructions] And we will take a follow-up from Matt Duncan with Stephens Incorporated..

Hey, guys.

So [indiscernible] against just how you guys are responding to the downturn energy from a cost perspective, what are you doing on the SG&A costs side are you guys trying to cut those expenses this year, David if you assume that revenues are down a little bit can we expect the same thing out of SG&A costs?.

So always remember that we are a highly incentivized company, so we have an unusual amount of variable cost in terms of commission and bonuses and etcetera.

But yes at the same time there would better be a lot of justification for raises, so I would say in general there is – if not any and that’s tied specifically you got to be a little smarter about that because that’s tied to our branches that are really heavily involved in oil and gas.

But if you are an industrial guy we are expecting them to grow, we are expecting them to increase their margins, increase the activity. So we would see things in that area you would give raises, you would you have maybe hopefully bigger bonuses and things.

So we are trying to be smart and you can’t – we work really, really hard and trying to do manage what I will call house cats and we don’t any of those and we try really, really hard to always be pushing the envelope in terms of productivity.

And so we are constantly even in good times really trying to manage our second largest expense which is our payroll, with first expense being cost of goods sold, so it’s about the people and you want to take care of the good ones as good as you can and you want to get rid of the bad ones.

And so we are constantly doing that everybody down to our people in our stores and there we share financial information with them. They understand what they are trying to manage and so the only thing that’s a little different this year is every pay increase is going to be approved by me and I haven’t had to approve too many..

What about on the fixed costs side, are you looking for opportunities to cut out fixed costs I mean I understand obviously the variable cost structure and then clearly it’s worked well over the years, but what are you doing with fixed costs?.

Yes.

That’s typically in the form of that we have branches or stores that are performing and so therefore we certainly try to consolidate them first with some other entity that’s not too far away or ultimately we closed it down and can give up on adverse when times were good you kind of continue to write it out and try to get the right people in there to make the go of it.

Today you don’t – we don’t have the luxury of doing that. So we still will shut them down. As far as bigger expenses than that, we are also constantly integrating everybody to our same computer system.

And as we do that, we normally can trim some administrative costs and so we are working on that as fast and as diligently like not too far distant future, Natpro will be on our system. So we are moving forward with things that will save us money in terms of….

Okay.

So the right way to think about it then is with being proactive with fixed costs and the variable side sort of taking care of itself, if sales are down, SG&A costs are going to be down, would be the right way for us to look at it?.

Yes..

Okay, alright, that’s helpful. Thanks David..

And we will take our follow-up from Joe Mondillo with Sidoti & Company..

Hey guys, I just had two quick follow-up questions, one in terms of the capital allocation and acquisitions versus share buybacks.

Just wondering how you are thinking about that any differently compared to a year ago, we just stopped down here, how do you balance – how are you thinking about balancing capital allocation versus acquisitions and stock buybacks?.

Well, we have been buyback enough to I think we started the year with fully diluted shares of 15,000,003 and we ended the year at 15,000,003. And so we are trying to buyback enough to kind of keep the dilution effect down to zero.

Beyond that we are awful attractive at 8 times EBITDA even though we are buying unknown companies at 5, but DXP is kind of a known company to me and it’s what 8 will then I think the price is too low, so we are looking at that. So we would certainly not go out and pay 10 times for somebody when we are trading at 8. That is still making sense.

So when we buy a really good company a profitable company the reason why let me just say this the reason why I think our M&A activity will be lighter this year than in other years is because we are going to be more selective in terms of what we buy.

If it’s a solid company, they don’t have G&A add backs and they make really good money, and that’s the kind of acquisition we are going to do, and it’s one that wont’ have any surprises versus one that’s kind of marginal, but we want to – it’s in Seattle Washington. So we want to be there kind of deals.

So we do that kind of deals, not that we don’t expect it to be good, but it’s just not a slammed up deal. So I think we will just be more selective. But you have raised a good equity question one of my jobs is to control our equity. And so we are definitely a little tighter than we normally would be..

Okay, and then just on the tax rate Mac, is there anything unusual this year that we should expect a different tax rate than sort of 37% level you have been..

I think the tax rate when you pull out the impairment charge is probably 38.1% or 38.2% for 2014, and I would expect that to be the right for the future..

Okay, that will do it. Thanks a lot..

That does conclude our conference. Thank you for your participation..

Thank you..