05/07/2019 | Press release | Archived content
HOUSTON--(BUSINESS WIRE)-- DXP Enterprises, Inc. (NASDAQ: DXPE) today announced financial results for the first quarter ended March 31, 2019. The following are results for the three months ended March 31, 2019, compared to the three months ended March 31, 2018. A reconciliation of the non-GAAP financial measures can be found in the back of this press release.
First Quarter 2019 financial highlights:
David R. Little, Chairman and CEO commented, "We are off to a good start again in 2019. Our first quarter performance shows the team maintained momentum and delivered on expected results. The oil and gas and industrial economy continues to remain firm with all key indicators remaining positive. During the first quarter, we achieved 8.8 percent organic sales growth and believe we continue to expand our leading market positions across our business segments. Our strong earnings per share growth speaks to our team's execution and focus on continuous improvement. DXP's first quarter 2019 sales were $311.2 million while EBITDA increased 17.7 percent year-over-year. In terms of our business segments for the first quarter of 2019, sales were $186.2 million for Service Centers, $74.7 million for Innovative Pumping Solutions and $50.3 million for Supply Chain Services. Business segment operating income increased 13.7 percent year-over-year. We delivered on our financial results as our markets and customers continue to perform. Entering the second quarter, we look forward to continued strength in our end markets while we drive operational excellence."
Kent Yee, CFO, remarked, "The first quarter of 2019 financial results were great to see. Our year-over-year financial results continue to reflect the growth we experienced in fiscal 2018. Solid sales growth, accompanied by in-line diluted earnings per share. Our current run rate sales volumes should allow us to leverage operating expenses, deliver on profitability and will lead to strong cash flow generation. We remain confident in the momentum continuing in our business segments and a strong 2019. Total debt outstanding as of March 31, 2019 was $247.9 million. DXP's secured leverage ratio or net debt to EBITDA ratio was 2.2:1.0."
We will host a conference call regarding 2019 first quarter results on the Company's website (www.dxpe.com) Tuesday, May 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 March 31, |
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2019 | 2018 | |||||
Sales | $ | 311,225 | $ | 285,936 | ||
Cost of sales | 227,025 | 209,491 | ||||
Gross profit | 84,200 | 76,445 | ||||
Selling, general and administrative expenses | 69,384 | 65,296 | ||||
Operating income | 14,816 | 11,149 | ||||
Other income, net | (33 | ) | (22 | ) | ||
Interest expense | 5,040 | 5,041 | ||||
Income before income taxes | 9,809 | 6,130 | ||||
Provision for income taxes | 2,622 | 1,636 | ||||
Net income | 7,187 | 4,494 | ||||
Net loss attributable to NCI* | (104 | ) | (57 | ) | ||
Net income attributable to DXP Enterprises, Inc. | 7,291 | 4,551 | ||||
Preferred stock dividend | 23 | 23 | ||||
Net income attributable to common shareholders | $ | 7,268 | $ | 4,528 | ||
Diluted earnings per share attributable to DXP Enterprises, Inc. | $ | 0.40 | $ | 0.24 | ||
Weighted average common shares and common equivalent shares outstanding | 18,406 | 18,741 | ||||
*NCI represents non-controlling interest | ||||||
Business segment financial highlights:
SEGMENT DATA |
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($ thousands, unaudited) |
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Sales | Operating Income | ||||||||||
Three Months Ended March 31, |
Three Months Ended March 31, |
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Business Segment | 2019 | 2018 | 2019 | 2018 | |||||||
Service Centers | $ | 186,179 | $ | 175,362 | $ | 18,980 | $ | 15,830 | |||
Innovative Pumping Solutions | 74,723 | 67,642 | 6,799 | 6,382 | |||||||
Supply Chain Services | 50,323 | 42,932 | 4,086 | 4,054 | |||||||
Total DXP Sales | $ | 311,225 | $ | 285,936 | $ | 29,865 | $ | 26,266 | |||
Reconciliation of Operating Income for Reportable Segments |
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($ thousands, unaudited) |
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Three Months Ended March 31, |
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2019 | 2018 | |||
Operating income for reportable segments | $ | 29,865 | $ | 26,266 |
Adjustment for: | ||||
Amortization of intangibles | 3,814 | 4,358 | ||
Corporate expenses | 11,235 | 10,759 | ||
Total operating income | 14,816 | 11,149 | ||
Interest expense | 5,040 | 5,041 | ||
Other income, net | (33 | ) | (22 | ) |
Income before income taxes | 9,809 | 6,130 | ||
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 March 31, |
Three Months |
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2019 | 2018 | 2018 | |||
Net income | 7,187 | 4,494 | 11,102 | ||
Plus: income tax expense | 2,622 | 1,636 | 4,223 | ||
Plus: interest expense | 5,040 | 5,041 | 4,978 | ||
Plus: depreciation and amortization | 6,206 | 6,714 | 6,454 | ||
EBITDA | 21,055 | 17,885 | 26,757 | ||
Plus: NCI loss before tax | 137 | 57 | 37 | ||
Plus: stock compensation expense | 505 | 736 | 526 | ||
Adjusted EBITDA | 21,697 | 18,678 | 27,320 | ||
DXP ENTERPRISES, INC. AND SUBSIDIARIES |
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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS |
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($ thousands, except per share amounts) |
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As of March 31, |
As of December 31, |
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ASSETS | |||||
Current assets: | |||||
Cash | $ | 30,606 | $ | 40,304 | |
Restricted cash | 122 | 215 | |||
Accounts receivable, net of allowances for doubtful accounts | 197,267 | 191,829 | |||
Inventories | 121,754 | 114,830 | |||
Costs and estimated profits in excess of billings | 38,150 | 32,514 | |||
Prepaid expenses and other current assets | 5,597 | 4,938 | |||
Federal income taxes receivable | - | 960 | |||
Total current assets | $ | 393,496 | $ | 385,590 | |
Property and equipment, net | 51,404 | 51,330 | |||
Goodwill | 194,052 | 194,052 | |||
Other intangible assets, net of accumulated amortization | 63,609 | 67,207 | |||
Operating lease right-of-use assets | 70,851 | - | |||
Other long-term assets | 1,795 | 1,783 | |||
Total assets | $ | 775,207 | $ | 699,962 | |
LIABILITIES AND EQUITY | |||||
Current liabilities: | |||||
Current maturities of long-term debt | $ | 3,414 | $ | 3,407 | |
Trade accounts payable | 92,460 | 87,407 | |||
Accrued wages and benefits | 16,882 | 21,275 | |||
Customer advances | 3,867 | 3,223 | |||
Billings in excess of costs and estimated profits | 8,207 | 10,696 | |||
Federal income taxes payable | 67 | - | |||
Current-portion operating lease liability | 17,660 | - | |||
Other current liabilities | 16,075 | 17,269 | |||
Total current liabilities | $ | 158,632 | $ | 143,277 | |
Long-term debt, less unamortized debt issuance costs | 236,591 | 236,979 | |||
Long-term operating lease liability | 52,993 | - | |||
Other long-term liabilities | 988 | 2,819 | |||
Deferred income taxes | 9,422 | 8,633 | |||
Total long-term liabilities | $ | 299,994 | $ | 248,431 | |
Total Liabilities | $ | 458,626 | $ | 391,708 | |
Equity: | |||||
Total DXP Enterprises, Inc. equity | 315,279 | 306,848 | |||
Non-controlling interest | 1,302 | 1,406 | |||
Total Equity | $ | 316,581 | $ | 308,254 | |
Total liabilities and equity | $ | 775,207 | $ | 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 March 31, |
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2019 | 2018 | |||
Net cash used in operating activities | (5,310 | ) | (808 | ) |
Less: purchase of equipment | 2,312 | 791 | ||
Plus: proceeds from sales of assets | 29 | - | ||
Free cash flow | (7,593 | ) | (1,599 | ) |
View source version on businesswire.com: https://www.businesswire.com/news/home/20190507005264/en/
Kent Yee
713-996-4700
Senior Vice President, CFO
www.dxpe.com
Source: DXP Enterprises, Inc.