DXP Enterprises Inc.

08/06/2019 | Press release | Archived content

Second Quarter 2019 Press Release

  • $333.3 million in sales, up 7.1 percent, compared to $311.2 million in sales in Q2 2018
  • Net income of $13.4 million versus $11.5 million compared to Q2 2018
  • GAAP diluted EPS of $0.73, compared to $0.63 in Q2 2018
  • $28.7 million in earnings before interest, taxes, depreciation and amortization ("EBITDA")

HOUSTON--(BUSINESS WIRE)-- DXP Enterprises, Inc. (NASDAQ: DXPE) today announced financial results for the second quarter ended June 30, 2019. The following are results for the three and six months ended June 30, 2019, compared to the three and six months ended June 30, 2018. A reconciliation of the non-GAAP financial measures can be found in the back of this press release.

For the six months ended June 30, 2019, sales were $644.5 million, up 7.9 percent over the same period in 2018. EBITDA is up 11.8 percent to $49.8 million for the six month period, compared to the same six month period in 2018 (adjusting for the one-time gain associated with selling a corporate facility).

Second Quarter 2019 financial highlights:

  • Sales increased 7.1 percent to $333.3 million, compared to $311.2 million for the second quarter of 2018.
  • Earnings per diluted share for the second quarter was $0.73 based upon 18.4 million diluted shares, compared to $0.63 per share in the second quarter of 2018.
  • Earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter was $28.7 million compared to $28.0 million for the second quarter of 2018, an increase of 2.7 percent. Adjusting for the one-time gain associated with selling a corporate facility, EBITDA increased 7.8 percent.
  • EBITDA as a percentage of sales was 8.6 percent for the second quarter of 2019 and 2018, respectively.

David R. Little, Chairman and CEO, commented, "We are pleased with our year-over-year and sequential sales growth and continual improvement in gross profit margins. Underlying demand in our end markets is consistent and continues to perform plus we continue to take market share. DXP's second quarter 2019 sales were $333.3 million, or a 7.1 percent increase over the second quarter of 2018. EBITDA grew 7.8 percent. During the second quarter of 2019, sales were $200.0 million for Service Centers, $81.0 million for Innovative Pumping Solutions and $52.3 million for Supply Chain Services. Business segment operating income increased 11.1 percent year-over-year and increased 30.7 percent sequentially. Overall, we are very pleased with the progress DXP is making. We maintained margin performance, improved cash flow and we are taking market share. We continue to invest in our growth strategies and focus on growing the top-line and bottom-line at the same time."

Kent Yee, CFO, commented, "For the second quarter, we are pleased that we achieved diluted EPS of $0.73, with 15.9 percent year-over-year growth and EBITDA of $28.7 million. Our gross margins showed improvement with the DXP team looking to drive further consistency, improving 25 basis points year-over-year and 54 basis points sequentially. Total debt outstanding as of June 30, 2019 was $247.0 million. DXP's secured leverage ratio or net debt to EBITDA was 2.2:1.0. Our push for profitable growth, combined with disciplined execution, continues to position DXP well for the future."

We will host a conference call regarding 2019 second quarter results on the Company's website (www.dxpe.com) Tuesday, August 6, 2019 at 4 pm 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.

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.

DXP ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2019

2018

2019

2018

Sales

$

333,318

$

311,227

$

644,543

$

597,163

Cost of sales

241,331

226,111

468,356

435,602

Gross profit

91,987

85,116

176,187

161,561

Selling, general and administrative expenses

69,140

65,056

138,524

130,352

Operating income

22,847

20,060

37,663

31,209

Other expense (income), net

185

(1,416

)

152

(1,438

)

Interest expense

4,885

6,137

9,925

11,178

Income before income taxes

17,777

15,339

27,586

21,469

Provision for income taxes

4,427

3,776

7,049

5,412

Net income

13,350

11,563

20,537

16,057

Net (loss) income attributable to NCI*

(109

)

1

(213

)

(56

)

Net income attributable to DXP Enterprises, Inc.

13,459

11,562

20,750

16,113

Preferred stock dividend

22

22

45

45

Net income attributable to common shareholders

$

13,437

$

11,540

$

20,705

$

16,068

Diluted earnings per share attributable to DXP Enterprises, Inc.

$

0.73

$

0.63

$

1.13

$

0.88

Weighted average common shares and common equivalent shares outstanding

18,436

18,398

18,421

18,378

*NCI represents non-controlling interest

Business segment financial highlights:

  • Service Centers' revenue for the second quarter was $200.0 million, an increase of 3.3 percent year-over-year with an 11.6 percent operating income margin.
  • Innovative Pumping Solutions' revenue for the second quarter was $81.0 million, an increase of 9.1 percent year-over-year with a 14.8 percent operating income margin.
  • Supply Chain Services' revenue for the second quarter was $52.3 million, an increase of 20.6 percent year-over-year with a 7.2 percent operating income margin.

SEGMENT DATA
 ($ thousands, unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

Sales

2019

2018

2019

2018

Service Centers

$

199,978

$

193,576

$

386,157

$

368,937

Innovative Pumping Solutions

81,028

74,257

155,751

141,899

Supply Chain Services

52,312

43,394

102,635

86,327

Total DXP Sales

$

333,318

$

311,227

$

644,543

$

597,163

Three Months Ended June 30,

Six Months Ended June 30,

Operating Income

2019

2018

2019

2018

Service Centers

$

23,230

$

21,933

$

42,210

$

37,762

Innovative Pumping Solutions

12,028

8,956

18,827

15,338

Supply Chain Services

3,784

4,255

7,870

8,309

Total segments operating income

$

39,042

$

35,144

$

68,907

$

61,409

Reconciliation of Operating Income for Reportable Segments
 ($ thousands, unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2019

2018

2019

2018

Operating income for reportable segments

$

39,042

$

35,144

$

68,907

$

61,409

Adjustment for:

Amortization of intangibles

3,803

4,119

7,617

8,477

Corporate expenses

12,392

10,965

23,627

21,723

Total operating income

22,847

20,060

37,663

31,209

Interest expense

4,885

6,137

9,925

11,178

Other income, net

185

(1,416

)

152

(1,438

)

Income before income taxes

17,777

15,339

27,586

21,469

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 net income, calculated and reported in accordance with U.S. GAAP.

Three Months Ended June 30,

Six Months Ended June 30,

2019

2018

2019

2018

Net income

13,350

11,563

20,537

16,057

Plus: income tax expense

4,427

3,776

7,049

5,412

Plus: interest expense

4,885

6,137

9,925

11,178

Plus: depreciation and amortization

6,065

6,491

12,271

13,205

EBITDA

28,727

27,967

49,782

45,852

Plus: NCI (loss) income before tax

(145

)

1

283

(56

)

Plus: stock compensation expense

524

761

1,029

1,497

Adjusted EBITDA

29,106

28,729

51,094

47,293

* NCI represents non-controlling interest

DXP ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 ($ thousands, except per share amounts)

As of

June 30, 2019

December 31, 2018

ASSETS

Current assets:

Cash

$

25,429

$

40,304

Restricted cash

124

215

Accounts receivable, net of allowances for doubtful accounts

210,257

191,829

Inventories

128,012

114,830

Costs and estimated profits in excess of billings

35,484

32,514

Prepaid expenses and other current assets

4,729

4,938

Federal income taxes receivable

593

960

Total current assets

$

404,628

$

385,590

Property and equipment, net

55,534

51,330

Goodwill

194,052

194,052

Other intangible assets, net of accumulated amortization

59,953

67,207

Operating lease right-of-use assets

69,094

-

Other long-term assets

3,346

1,783

Total assets

$

786,607

$

699,962

LIABILITIES AND EQUITY

Current liabilities:

Current maturities of long-term debt

$

3,420

$

3,407

Trade accounts payable

89,293

87,407

Accrued wages and benefits

20,772

21,275

Customer advances

5,077

3,223

Billings in excess of costs and estimated profits

5,968

10,696

Current-portion operating lease liabilities

17,887

-

Other current liabilities

15,904

17,269

Total current liabilities

$

158,321

$

143,277

Long-term debt, less unamortized debt issuance costs

236,202

236,979

Long-term operating lease liabilities

51,188

-

Other long-term liabilities

1,024

2,819

Deferred income taxes

9,662

8,633

Total long-term liabilities

$

298,076

$

248,431

Total Liabilities

$

456,397

$

391,708

Equity:

Total DXP Enterprises, Inc. equity

329,017

306,848

Non-controlling interest

1,193

1,406

Total Equity

$

330,210

$

308,254

Total liabilities and equity

$

786,607

$

699,962

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 June 30,

Six Months Ended June 30,

2019

2018

2019

2018

Net cash from (used in) operating activities

1,850

(6,175

)

(3,460

)

(6,983

)

Less: purchases of equipment

(6,272

)

(4,725

)

(8,584

)

(5,516

)

Plus: proceeds from sales of assets

5

2,700

34

2,700

Free cash flow

(4,417

)

(8,200

)

(12,010

)

(9,799

)

View source version on businesswire.com: https://www.businesswire.com/news/home/20190806005812/en/

Kent Yee
713-996-4700
Senior Vice President, CFO
www.dxpe.com

Source: DXP Enterprises, Inc.