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DXP Enterprises, Inc.$32.20($.40)(1.23%)

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 DXP Enterprises Reports Second Quarter 2019 Results
   Tuesday, August 06, 2019 4:00:00 PM ET
  • $ 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:

  • 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.
  • 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.
  • 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

)

 

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

Source: DXP Enterprises, Inc.



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