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| 8-K - 8-K - DXP ENTERPRISES INC | coverpage.htm |
 | NEWS RELEASE CONTACT: Kent Yee Senior Vice President, CFO www.dxpe.com THE INDUSTRIAL DISTRIBUTION EXPERTS | |
DXP ENTERPRISES REPORTS THIRD QUARTER 2018 RESULTS
• | Sales grew 22.3 percent, including 17.5 percent organic growth |
• | $308.0 million in sales versus $251.9 million in sales in Q3 2017 |
• | Net income of $8.4 million versus $2.9 million compared to Q3 2017 |
• | GAAP diluted EPS of $0.46, compared to $0.16 in Q3 2017 |
• | $23.2 million in earnings before interest, taxes, depreciation and amortization (“EBITDA”) |
Houston, TX – November 5, 2018 – DXP Enterprises, Inc. (NASDAQ: DXPE) today announced financial results for the third quarter ended September 30, 2018. The following are results for the three months and nine months ended September 30, 2018, compared to the three months and nine months ended September 30, 2017. A reconciliation of the non-GAAP financial measures can be found in the back of this press release.
Third Quarter 2018 financial highlights:
• | Sales increased 22.3 percent to $308.0 million, compared to $251.9 million for the third quarter of 2017. |
• | Earnings per diluted share for the third quarter was $0.46 based upon 18.4 million diluted shares, compared to $0.16 per share in the third quarter of 2017, based on 18.2 million diluted shares. |
• | Earnings before interest, taxes, depreciation and amortization (EBITDA) for the third quarter was $23.2 million compared to $13.5 million for the third quarter of 2017, an increase of 71.9 percent. EBITDA as a percentage of sales was 7.5 percent and 5.4 percent, respectively, comparing the third quarter of 2018 versus 2017. |
David R. Little, Chairman and CEO commented, “We are pleased with our performance in the third quarter as the team maintained momentum and delivered strong results. The oil and gas and industrial economy remain firm with all key indicators remaining positive. We achieved 22.3 percent sales growth, solid EBITDA margins and outstanding diluted earnings per share growth. DXP’s third quarter 2018 sales were $308.0 million. Organic sales for the quarter increased 17.5 percent year-over-year and acquisitions added $12.1 million in sales. EBITDA grew 71.9 percent year-over-year. In terms of our business segments for the third quarter of 2018, sales were $187.8 million for Service Centers, $76.7 million for Innovative Pumping Solutions and $43.6 million for Supply Chain Services. Business segment operating income increased 55.6 percent year-over-year. Overall, DXP has been trending around 20 percent growth year-over-year which is consistent with our expectations. With the outlook for global economic growth and oil and industrial demand remaining solid, we still look to show improvement in organic and acquisition sales growth and margins. We believe we are well positioned to outgrow the market and to generate improved operating margins and returns for the benefit of our shareholders as we begin to move into 2019.”
Kent Yee, CFO, remarked, “Our third quarter year-over-year financial results continue to reflect the growth we have been experiencing in fiscal 2018 and reflect our financial goals to grow 20 percent year-over-year, through a combination of organic and acquisition sales. On a sales per day basis, DXP continues to show sequential increases and has experienced eight consecutive quarters of sales per day per quarter increases. Total debt outstanding as of September 30, 2018 was $249.6 million. DXP’s secured leverage ratio or net debt to EBITDA ratio was 2.7:1.0. We expect to finish fiscal 2018 with strong momentum continuing into fiscal 2019.”
We will host a conference call regarding 2018 third quarter results on the Company’s website (www.dxpe.com) Monday, November 5, 2018 at 10 am CST. Web participants are encouraged to go to the Company’s website at least 15 minutes prior to the start of the call to register, download and install any necessary audio software. The on-line archived replay will be available immediately after the conference call at www.dxpe.com.
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| NEWS RELEASE CONTACT: Kent Yee Senior Vice President, CFO www.dxpe.com THE INDUSTRIAL DISTRIBUTION EXPERTS | |
Non-GAAP Financial Measures
DXP supplements reporting of net income with non-GAAP measurements, including EBITDA, adjusted EBITDA and free cash flow. This supplemental information should not be considered in isolation or as a substitute for the unaudited GAAP measurements. Additional information regarding EBITDA and free cash flow referred to in this press release are included below under "Unaudited Reconciliation of Non-GAAP Financial Information."
The Company believes EBITDA provides additional information about: (i) operating performance, because it assists in comparing the operating performance of the business, as it removes the impact of non-cash depreciation and amortization expense as well as items not directly resulting from core operations such as interest expense and income taxes and (ii) the performance and the effectiveness of operational strategies. Additionally, EBITDA performance is a component of a measure of the Company’s financial covenants under its credit facility. Furthermore, some investors use EBITDA as a supplemental measure to evaluate the overall operating performance of companies in the industry. Management believes that some investors’ understanding of performance is enhanced by including this non-GAAP financial measure as a reasonable basis for comparing ongoing results of operations. By providing this non-GAAP financial measure, together with a reconciliation from net income, the Company believes it is enhancing investors’ understanding of the business and results of operations, as well as assisting investors in evaluating how well the Company is executing strategic initiatives.
About DXP Enterprises, Inc.
DXP Enterprises, Inc. is a leading products and service distributor that adds value and total cost savings solutions to industrial customers throughout the United States, Canada, Mexico and Dubai. DXP provides innovative pumping solutions, supply chain services and maintenance, repair, operating and production ("MROP") services that emphasize and utilize DXP’s vast product knowledge and technical expertise in rotating equipment, bearings, power transmission, metal working, industrial supplies and safety products and services. DXP's breadth of MROP products and service solutions allows DXP to be flexible and customer-driven, creating competitive advantages for our customers. DXP’s business segments include Service Centers, Innovative Pumping Solutions and Supply Chain Services. For more information, go to www.dxpe.com.
The Private Securities Litigation Reform Act of 1995 provides a “safe-harbor” for forward-looking statements. Certain information included in this press release (as well as information included in oral statements or other written statements made by or to be made by the Company) contains statements that are forward-looking. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future; and accordingly, such results may differ from those expressed in any forward-looking statement made by or on behalf of the Company. These risks and uncertainties include, but are not limited to; ability to obtain needed capital, dependence on existing management, leverage and debt service, domestic or global economic conditions, and changes in customer preferences and attitudes. In some cases, you can identify forward-looking statements by terminology such as, but not limited to, “may,” “will,” “should,” “intend,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “goal,” or “continue” or the negative of such terms or other comparable terminology. For more information, review the Company’s filings with the Securities and Exchange Commission.
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| NEWS RELEASE CONTACT: Kent Yee Senior Vice President, CFO www.dxpe.com THE INDUSTRIAL DISTRIBUTION EXPERTS | |
DXP ENTERPRISES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ($ thousands, except per share amounts) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Sales | $ | 308,028 | $ | 251,930 | $ | 905,191 | $ | 741,155 | ||||||||
Cost of sales | 223,958 | 184,967 | 659,560 | 540,741 | ||||||||||||
Gross profit | 84,070 | 66,963 | 245,631 | 200,414 | ||||||||||||
Selling, general and administrative expenses | 67,257 | 60,453 | 197,609 | 175,411 | ||||||||||||
Operating income | 16,813 | 6,510 | 48,022 | 25,003 | ||||||||||||
Other (income) expense, net | 120 | (153 | ) | (1,318 | ) | (324 | ) | |||||||||
Interest expense | 4,781 | 4,928 | 15,959 | 12,573 | ||||||||||||
Income before income taxes | 11,912 | 1,735 | 33,381 | 12,754 | ||||||||||||
Provision for (benefit from) income taxes | 3,550 | (1,176 | ) | 8,962 | 2,880 | |||||||||||
Net income | 8,362 | 2,911 | 24,419 | 9,874 | ||||||||||||
Net loss attributable to NCI* | (35 | ) | (55 | ) | (91 | ) | (360 | ) | ||||||||
Net income attributable to DXP Enterprises, Inc. | 8,397 | 2,966 | 24,510 | 10,234 | ||||||||||||
Preferred stock dividend | 23 | 23 | 68 | 68 | ||||||||||||
Net income attributable to common shareholders | $ | 8,374 | $ | 2,943 | $ | 24,442 | $ | 10,166 | ||||||||
Diluted earnings per share attributable to DXP Enterprises, Inc. | $ | 0.46 | $ | 0.16 | $ | 1.33 | $ | 0.56 | ||||||||
Weighted average common shares and common equivalent shares outstanding | 18,404 | 18,234 | 18,387 | 18,242 | ||||||||||||
*NCI represents non-controlling interest | ||||||||||||||||
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| NEWS RELEASE CONTACT: Kent Yee Senior Vice President, CFO www.dxpe.com THE INDUSTRIAL DISTRIBUTION EXPERTS | |
Business segment financial highlights:
• | Service Centers’ revenue for the third quarter was $187.8 million, an increase of 16.7 percent year-over-year with an 11.0 percent operating income margin. Organic sales increased 9.2 percent year-over-year. |
• | Innovative Pumping Solutions’ revenue for the third quarter was $76.7 million, an increase of 50.2 percent year-over-year with a 11.4 percent operating income margin. |
• | Supply Chain Services’ revenue for the third quarter was $43.6 million, an increase of 8.9 percent year-over-year with a 8.9 percent operating income margin. |
SEGMENT DATA
($ thousands, unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
Sales | 2018 | 2017 | 2018 | 2017 | |||||||||||
Service Centers | $ | 187,763 | $ | 160,863 | $ | 556,700 | $ | 474,324 | |||||||
Innovative Pumping Solutions | 76,662 | 51,027 | 218,561 | 144,555 | |||||||||||
Supply Chain Services | 43,603 | 40,040 | 129,930 | 122,276 | |||||||||||
Total DXP Sales | $ | 308,028 | $ | 251,930 | $ | 905,191 | $ | 741,155 | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
Operating Income | 2018 | 2017 | 2018 | 2017 | |||||||||||
Service Centers | $ | 20,590 | $ | 15,550 | $ | 58,353 | $ | 47,308 | |||||||
Innovative Pumping Solutions | 8,773 | 1,838 | 24,109 | 7,103 | |||||||||||
Supply Chain Services | 3,886 | 3,982 | 12,196 | 11,758 | |||||||||||
Total segments operating income | $ | 33,249 | $ | 21,370 | $ | 94,658 | $ | 66,169 | |||||||
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| NEWS RELEASE CONTACT: Kent Yee Senior Vice President, CFO www.dxpe.com THE INDUSTRIAL DISTRIBUTION EXPERTS | |
Reconciliation of Operating Income for Reportable Segments
($ thousands, unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Operating income for reportable segments | $ | 33,249 | $ | 21,370 | $ | 94,658 | $ | 66,169 | |||||||
Adjustment for: | |||||||||||||||
Amortization of intangibles | 4,098 | 4,336 | 12,575 | 12,943 | |||||||||||
Corporate expenses | 12,338 | 10,524 | 34,061 | 28,223 | |||||||||||
Total operating income | 16,813 | 6,510 | 48,022 | 25,003 | |||||||||||
Interest expense | 4,781 | 4,928 | 15,959 | 12,573 | |||||||||||
Other expense (income), net | 120 | (153 | ) | (1,318 | ) | (324 | ) | ||||||||
Income before income taxes | 11,912 | 1,735 | 33,381 | 12,754 | |||||||||||
Unaudited Reconciliation of Non-GAAP Financial Information
($ thousands, unaudited)
The following table is a reconciliation of EBITDA and adjusted EBITDA, a non-GAAP financial measure, to income before income taxes, calculated and reported in accordance with U.S. GAAP.
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Income before income taxes | 11,912 | 1,735 | 33,381 | 12,754 | |||||||
Plus: interest expense | 4,781 | 4,928 | 15,959 | 12,573 | |||||||
Plus: depreciation and amortization | 6,506 | 6,836 | 19,710 | 20,598 | |||||||
EBITDA | 23,199 | 13,499 | 69,050 | 45,925 | |||||||
Plus: NCI loss before tax | 64 | 85 | 120 | 578 | |||||||
Plus: Stock compensation expense | 526 | 382 | 2,023 | 1,392 | |||||||
Adjusted EBITDA | 23,789 | 13,966 | 71,193 | 47,895 | |||||||
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| NEWS RELEASE CONTACT: Kent Yee Senior Vice President, CFO www.dxpe.com THE INDUSTRIAL DISTRIBUTION EXPERTS | |
DXP ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
($ thousands, except per share amounts)
September 30, 2018 | December 31, 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash | $ | 15,994 | $ | 22,047 | |||
Restricted Cash | 396 | 3,532 | |||||
Accounts receivable, net of allowances for doubtful accounts | 183,454 | 167,272 | |||||
Inventories | 116,545 | 91,413 | |||||
Costs and estimated profits in excess of billings | 38,432 | 26,915 | |||||
Prepaid expenses and other current assets | 5,640 | 5,296 | |||||
Federal income taxes receivable | 1,323 | 1,440 | |||||
Total current assets | 361,784 | 317,915 | |||||
Property and equipment, net | 52,617 | 53,337 | |||||
Goodwill | 194,052 | 187,591 | |||||
Other intangible assets, net of accumulated amortization | 71,783 | 78,525 | |||||
Other long-term assets | 1,596 | 1,715 | |||||
Total assets | $ | 681,832 | $ | 639,083 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Current maturities of long-term debt | $ | 3,394 | $ | 3,381 | |||
Trade accounts payable | 91,117 | 80,303 | |||||
Accrued wages and benefits | 16,733 | 18,483 | |||||
Customer advances | 2,876 | 2,189 | |||||
Billings in excess of costs and estimated profits | 5,554 | 4,249 | |||||
Other current liabilities | 16,703 | 16,220 | |||||
Total current liabilities | 136,377 | 124,825 | |||||
Long-term debt, less unamortized debt issuance costs | 237,434 | 238,643 | |||||
Other long-term liabilities | 2,611 | — | |||||
Deferred income taxes | 8,048 | 7,069 | |||||
Total long-term liabilities | 248,093 | 245,712 | |||||
Total Liabilities | 384,470 | 370,537 | |||||
Equity: | |||||||
Total DXP Enterprises, Inc. equity | 296,885 | 267,979 | |||||
Non-controlling interest | 477 | 567 | |||||
Total Equity | 297,362 | 268,546 | |||||
Total liabilities and equity | $ | 681,832 | $ | 639,083 | |||
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| NEWS RELEASE CONTACT: Kent Yee Senior Vice President, CFO www.dxpe.com THE INDUSTRIAL DISTRIBUTION EXPERTS | |
Unaudited Reconciliation of Non-GAAP Financial Information
($ thousands, unaudited)
The following table is a reconciliation of free cash flow, a non-GAAP financial measure, to cash flow from operating activities, calculated and reported in accordance with U.S. GAAP.
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net cash provided by operating activities | $ | 16,825 | $ | 673 | $ | 9,842 | $ | 8,527 | |||||||
Less: purchase of equipment | 2,189 | 1,039 | 7,705 | 2,157 | |||||||||||
Free cash flow | 14,636 | (366 | ) | 2,137 | 6,370 | ||||||||||
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