DSG(DSGR) - 2021 Q1 - Quarterly Report

Acquisition and Revenue - The company acquired Partsmaster for $35.3 million, contributing$15.7 million in revenue and $0.7 million in operating income in Q1 2021[93] - Total sales increased by 13.8$103.6 million in Q1 2021 compared to $91.0 million in Q1 2020, with Partsmaster accounting for$15.7 million of this increase[109] - Average daily sales rose by 15.6% to $1.644 million in Q1 2021, with Partsmaster contributing$0.250 million[109] Profitability and Margins - Gross profit increased by $5.6 million to$54.6 million in Q1 2021, with a gross profit margin of 52.7% compared to 53.7% in the prior year[111] - Adjusted non-GAAP operating income was $7.2 million in Q1 2021, down from$7.9 million in Q1 2020, primarily due to lower organic sales[105] - The organic Lawson MRO segment gross margin declined to 58.2% in Q1 2021 from 60.8% in the prior year, impacted by a shift to lower margin products[111] Expenses - Selling expenses increased to $23.8 million in Q1 2021 from$20.0 million in Q1 2020, driven by $5.5 million from the Partsmaster acquisition[1] - General and administrative expenses rose to$25.9 million in Q1 2021 from $10.3 million in Q1 2020, primarily due to an$11.7 million increase in stock-based compensation[2] - Interest expense was $0.3 million in Q1 2021, an increase of$0.2 million compared to Q1 2020, mainly due to interest on the accrued acquisition liability[3] Tax and Other Income - Income tax expense was $1.3 million in Q1 2021, with a 26.0$4.9 million and 28.0% in Q1 2020[5] - Other income, net increased by $1.5 million in Q1 2021, primarily due to Canadian currency exchange rate effects[4] Cash and Capital Expenditures - Available cash and cash equivalents were$26.3 million on March 31, 2021, down from $28.4 million on December 31, 2020[6] - Capital expenditures for Q1 2021 were$0.8 million, up from $0.6 million in Q1 2020, primarily for distribution center improvements[7] - The company had$64.4 million of borrowing availability remaining under its Revolving Credit Facility as of March 31, 2021[8] Future Obligations and Strategic Focus - A payment of $33.0 million is due to the sellers of Partsmaster in May 2021, guaranteed under the Purchase Agreement[9] - The company believes cash from operations and available funds under the Credit Agreement are sufficient to meet operating requirements and strategic initiatives[10] Sales and Productivity - The average sales representative headcount increased to 1,083 in Q1 2021 from 998 in Q1 2020, with productivity rising 7.3$1,360 per rep per day[103] - The company plans to continue focusing on increasing the productivity of its sales representatives[103] Market Indicators - The PMI index averaged 61.4 in Q1 2021, indicating expansion in the manufacturing sector compared to 50.0 in Q1 2020[102] - The company deferred $3.5 million in employer-side social security payments under the CARES Act, with$1.7 million expected to be paid in 2021[97]