DXP Enterprises Inc.

11/06/2019 | Press release | Archived content

Third Quarter 2019 Press Release

  • $327.2 million in sales, up 6.2 percent, compared to $308.0 million in sales in Q3 2018
  • Net income of $13.1 million versus $8.4 million compared to Q3 2018
  • GAAP diluted EPS of $0.71, compared to $0.46 in Q3 2018
  • $28.2 million in earnings before interest, taxes, depreciation and amortization ("EBITDA")

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

Third Quarter 2019 financial highlights:

  • Sales increased 6.2 percent to $327.2 million, compared to $308.0 million for the third quarter of 2018.
  • Earnings per diluted share for the third quarter was $0.71 based upon 18.4 million diluted shares, compared to $0.46 per share in the third quarter of 2018, based on 18.4 million diluted shares.
  • Earnings before interest, taxes, depreciation and amortization (EBITDA) for the third quarter was $28.2 million compared to $23.2 million for the third quarter of 2018, an increase of 21.4 percent.

David R. Little, Chairman and CEO commented, "DXP reported excellent sales and net income for the third quarter. We are pleased with our results, which reflect continued execution of our strategy and a focus on being customer driven experts in MROP solutions. Underlying demand in our end markets has wavered but we continue to take market share and focus on execution. We achieved 6.2 percent sales growth, maintained EBITDA margins and drove outstanding diluted earnings per share growth. During the third quarter of 2019, sales were $193.7 million for Service Centers, $82.2 million for Innovative Pumping Solutions and $51.3 million for Supply Chain Services. Business segment operating income increased 15.1 percent year-over-year. DXP's third quarter 2019 total sales were $327.2 million and EBITDA grew 21.4 percent year-over-year. Overall, we maintained margin performance, continued to improve cash flow and executed in a changing end market backdrop. We will remain focused on growing the top-line and bottom-line as we move into fiscal 2020."

Kent Yee, CFO, commented, "We are pleased with 6.2 percent sales growth and 8.6 percent EBITDA margins. This translated into $0.71 diluted earnings per share or 54.3 percent earnings growth year-over-year. Total debt outstanding as of September 30, 2019 was $245.0 million. DXP's secured leverage ratio or net debt to EBITDA was 2.0:1.0. Our strong execution with our focus on sales growth and margin improvement delivered strong earnings, generated cash flow and continues to position us drive shareholder value."

We will host a conference call regarding 2019 third quarter results on the Company's website (www.dxpe.com) Thursday, November 7, 2019 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.

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 September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Sales

$

327,178

$

308,028

$

971,721

$

905,191

Cost of sales

234,474

223,958

702,830

659,560

Gross profit

92,704

84,070

268,891

245,631

Selling, general and administrative expenses

70,987

67,257

209,511

197,609

Operating income

21,717

16,813

59,380

48,022

Other (income) expense, net

(25

)

120

127

(1,318

)

Interest expense

4,986

4,781

14,911

15,959

Income before income taxes

16,756

11,912

44,342

33,381

Provision for income taxes

3,606

3,550

10,655

8,962

Net income

13,150

8,362

33,687

24,419

Net income (loss) attributable to NCI*

41

(35

)

(172

)

(91

)

Net income attributable to DXP Enterprises, Inc.

$

13,109

$

8,397

$

33,859

$

24,510

Preferred stock dividend

23

23

68

68

Net income attributable to common shareholders

$

13,086

$

8,374

$

33,791

$

24,442

Diluted earnings per share attributable to DXP Enterprises, Inc.

$

0.71

$

0.46

$

1.84

$

1.33

Weighted average common shares and common equivalent shares outstanding

18,442

18,404

18,428

18,387

*NCI represents non-controlling interest

Business segment financial highlights:

  • Service Centers' revenue for the third quarter was $193.7 million, an increase of 3.2 percent year-over-year with a 12.9 percent operating income margin.
  • Innovative Pumping Solutions' revenue for the third quarter was $82.2 million, an increase of 7.2 percent year-over-year with a 12.3 percent operating income margin.
  • Supply Chain Services' revenue for the third quarter was $51.3 million, an increase of 17.6 percent year-over-year with a 6.1 percent operating income margin.

SEGMENT DATA

($ thousands, unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

Sales

2019

2018

2019

2018

Service Centers

$

193,727

$

187,763

$

579,884

$

556,700

Innovative Pumping Solutions

82,169

76,662

237,920

218,561

Supply Chain Services

51,282

43,603

153,917

129,930

Total DXP Sales

$

327,178

$

308,028

$

971,721

$

905,191

Three Months Ended
September 30,

Nine Months Ended
September 30,

Operating Income

2019

2018

2019

2018

Service Centers

$

25,071

$

20,590

$

67,281

$

58,353

Innovative Pumping Solutions

10,097

8,773

28,924

24,109

Supply Chain Services

3,110

3,886

10,980

12,196

Total segments operating income

$

38,278

$

33,249

$

107,185

$

94,658

Reconciliation of Operating Income for Reportable Segments

($ thousands, unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Operating income for reportable segments

$

38,278

$

33,249

$

107,185

$

94,658

Adjustment for:

Amortization of intangibles

3,806

4,098

11,424

12,575

Corporate expenses

12,755

12,338

36,381

34,061

Total operating income

21,717

16,813

59,380

48,022

Interest expense

4,986

4,781

14,911

15,959

Other expense (income), net

(25

)

120

127

(1,318

)

Income before income taxes

$

16,756

$

11,912

$

44,342

$

33,381

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,

2019

2018

2019

2018

Income before income taxes

$

16,756

$

11,912

$

44,342

$

33,381

Plus: interest expense

4,986

4,781

14,911

15,959

Plus: depreciation and amortization

6,422

6,506

18,693

19,710

EBITDA

$

28,164

$

23,199

$

77,946

$

69,050

Plus: NCI (income) loss before tax

(55

)

64

228

120

Plus: Stock compensation expense

473

526

1,502

2,023

Adjusted EBITDA

$

28,582

$

23,789

$

79,676

$

71,193

DXP ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

($ thousands, except per share amounts)

September 30, 2019

December 31, 2018

ASSETS

Current assets:

Cash

$

28,436

$

40,304

Restricted Cash

124

215

Accounts receivable, net of allowances for doubtful accounts

210,098

191,829

Inventories

131,916

114,830

Costs and estimated profits in excess of billings

33,898

32,514

Prepaid expenses and other current assets

6,328

4,938

Federal income taxes receivable

1,518

960

Total current assets

412,318

385,590

Property and equipment, net

58,516

51,330

Goodwill

194,052

194,052

Other intangible assets, net of accumulated amortization

56,072

67,207

Operating lease ROU asset

67,296

-

Other long-term assets

3,300

1,783

Total assets

$

791,554

$

699,962

LIABILITIES AND EQUITY

Current liabilities:

Current maturities of long-term debt

$

2,500

$

3,407

Trade accounts payable

83,174

87,407

Accrued wages and benefits

20,242

21,275

Customer advances

4,606

3,223

Billings in excess of costs and estimated profits

7,201

10,696

Short-term operating lease liability

17,711

-

Other current liabilities

16,544

17,269

Total current liabilities

151,978

143,277

Long-term debt, less unamortized debt issuance costs

235,576

236,979

Long-term operating lease liability

49,602

-

Other long-term liabilities

951

2,819

Deferred income taxes

11,056

8,633

Total long-term liabilities

297,185

248,431

Total Liabilities

449,163

391,708

Equity:

Total DXP Enterprises, Inc. equity

341,157

306,848

Non-controlling interest

1,234

1,406

Total Equity

342,391

308,254

Total liabilities and equity

$

791,554

$

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
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

Net cash provided by operating activities

$

10,943

$

16,825

$

7,483

$

9,842

Less: capital expenditures

(5,663

)

(2,189

)

(14,247

)

(7,705

)

Free cash flow

$

5,280

$

14,636

$

(6,764

)

$

2,137

View source version on businesswire.com: https://www.businesswire.com/news/home/20191106006101/en/

Kent Yee
Senior Vice President, CFO
[email protected]
www.dxpe.com

Source: DXP Enterprises, Inc.