Press Release Details

DXP Enterprises Announces Fourth Quarter and Fiscal 2018 Results

03/07/2019
  • Fiscal 2018 sales of $1.2 billion, up 20.8 percent, including 16.1 percent organic growth
  • Full year GAAP diluted EPS of $1.94, up 108.6 percent versus fiscal 2017
  • Net income of $35.5 million versus $16.8 million compared to fiscal 2017
  • $95.8 million in earnings before interest, taxes, depreciation and amortization (“EBITDA”)
  • Free cash flow of $29.1 million, including $2.6 million in proceeds from the sale of assets
  • Net debt of $208.4 million with $40.3 million in cash on the balance sheet

HOUSTON--(BUSINESS WIRE)-- DXP Enterprises, Inc. (NASDAQ:DXPE) today announced financial results for the fourth quarter and year ended December 31, 2018. The following are results for the three months and twelve months ended December 31, 2018, compared to the three months and twelve months ended December 31, 2017. A reconciliation of the non-GAAP financial measures can be found in the back of this press release.

Fourth Quarter 2018 financial highlights:

  • Sales increased 17.1 percent to $311.0 million, compared to $265.6 million for the fourth quarter of 2017.
  • Earnings per diluted share for the fourth quarter was $0.60 based upon 18.4 million diluted shares, compared to $0.36 per share in the fourth quarter of 2017, based on 18.2 million diluted shares.
  • Earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter was $26.8 million compared to $15.8 million for the fourth quarter of 2017, an increase of 69.3 percent. EBITDA as a percentage of sales was 8.6 percent and 6.0 percent, respectively.

Fiscal Year 2018 financial highlights:

  • Sales increased 20.8 percent to $1.2 billion , compared to $1.0 billion for 2017.
  • Earnings per diluted share for 2018 of $1.94 based upon 18.4 million diluted shares, compared to $0.93 per share in 2017, based on 18.2 million diluted shares.
  • Earnings before interest, taxes, depreciation and amortization (EBITDA) for the 2018 was $95.8 million compared to $61.7 million for 2017, an increase of 55.2 percent. EBITDA as a percentage of sales was 7.9 percent and 6.1 percent, respectively.

David R. Little, Chairman and CEO commented, “We are pleased with our fourth quarter results which wrapped up a tremendous fiscal 2018. In 2018, we returned to the sales growth we are accustomed to experiencing. This was driven through a combination of strong organic sales from our core, complemented by the acquisition of Application Specialties. This turned into 20.8 percent total sales growth with 16.1 percent organic growth. During the year, we delivered strong sales and EBITDA margin expansion, leading to significant earnings per share. We believe we continue to gain market share in many of our businesses driven by our focus on being fast, convenience, and technical experts for our customers. 'DXPeople you can trust.'

“DXP's fiscal 2018 total sales were $1.2 billion. Fiscal 2018 sales for Innovative Pumping Solutions grew 43.0 percent, Service Centers grew 17.0 percent and Supply Chain Services grew 8.0 percent. DXP produced total EBITDA of $95.8 million growing 55.2 percent over fiscal 2017.

“We continue to expect strong organic sales growth, EBITDA margin enhancement and strong cash flow generation. We are watching our key end markets closely, as the new normal seems to be periodic episodes of volatility as we experienced during the back of 2018. In fiscal 2019, we will build on the positive momentum generated in our business in 2018 and further the execution of our growth strategy, investments in our people and processes and maintain our cost discipline."

Kent Yee, CFO commented, “Fiscal 2018 financial performance reflects the execution of our financial goals and strategy. Total sales and EBITDA grew 20.8 percent and 55.2 percent, respectively. We delivered strong sales growth, operating margin expansion and thus operating leverage of 2.7x and notable free cash flow generation. Our fiscal 2018 diluted earnings per share was $1.94. We are pleased with the fourth quarter and year-end results. Our core business remains sound and continues to rebound and perform well. Our balance sheet is positioned to support the business over the long term. DXP ended the year with $40.3 millionin cash on the balance sheet and net debt of $208.4 million. DXP's secured leverage ratio or net debt to EBITDA was 2.2:1.0. We have momentum going to fiscal 2019 and we expect to drive both organic and acquisition driven growth."

We will host a conference call regarding 2018 fourth quarter and year-ended results on the Company’s website (www.dxpe.com) Thursday, March 7, 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.

Business Segment financial highlights:

  • Service Centers' revenue for the fiscal year was $750.0 million, an increase of 17.0 percent year-over-year with a 10.8 percent operating income margin.
    • Revenue for the fourth quarter was $193.3 million, an increase of 15.8 percent year-over-year with a 11.6 percent operating income margin. Organic sales increased 8.4 percent year-over-year.
  • Innovative Pumping Solutions’ revenue for the fiscal year was $291.7 million, an increase of 43.0 percent year over year with an 11.6 percent operating income margin.
    • Revenue for the fourth quarter was $73.1 million, an increase of 23.0 percent year-over-year with a 13.4 percent operating income margin.
  • Supply Chain Services’ revenue for the fiscal year was $174.5 million, an increase of 8.0 percent year-over-year with a 9.3 percent operating margin.
    • Revenue for the fourth quarter was $44.5 million, an increase of 13.6 percent year-over-year with a 9.0 percent operating income margin.

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
December 31,

Twelve Months Ended
December 31,

2018     2017 2018     2017
 
Sales $ 311,006 $ 265,627 $ 1,216,197 $ 1,006,782
Cost of sales 224,429   194,460   883,989   735,201  
Gross profit 86,577 71,167 332,208 271,581
Selling, general and administrative expenses 66,148   62,680   263,757   238,091  
Operating income 20,429 8,487 68,451 33,490
Other (income) expense, net 126 (132 ) (1,192 ) (456 )
Interest expense 4,978   4,481   20,937   17,054  
Income before income taxes 15,325 4,138 48,706 16,892
Provision for (benefit from) income taxes 4,223   (2,517 ) 13,185   363  
Net income 11,102 6,655 35,521 16,529
Net income (loss) attributable to NCI* (20 ) 1   (111 ) (359 )
Net income attributable to DXP Enterprises, Inc. 11,122 6,654 35,632 16,888
Preferred stock dividend 22   22   90   90  
Net income attributable to common shareholders $ 11,100   $ 6,632   $ 35,542   $ 16,798  
 
Diluted earnings per share attributable to DXP Enterprises, Inc. $ 0.60   $ 0.36   $ 1.94   $ 0.93  
 
Weighted average common shares and common equivalent shares outstanding 18,410   18,232   18,393   18,240  
 
*NCI represents non-controlling interest
 

         
SEGMENT DATA
($ thousands, unaudited)
 

Three Months Ended
December 31,

Twelve Months Ended
December 31,

Sales 2018     2017 2018     2017
Service Centers $ 193,343 $ 166,951 $ 750,044 $ 641,275
Innovative Pumping Solutions 73,137 59,474 291,697 204,030
Supply Chain Services 44,526   39,201   174,456   161,477
Total DXP Sales $ 311,006   $ 265,626   $ 1,216,197   $ 1,006,782
 
 

Three Months Ended
December 31,

Twelve Months Ended
December 31,

Operating Income 2018 2017 2018 2017
Service Centers $ 22,366 $ 15,941 $ 80,718 $ 63,250
Innovative Pumping Solutions 9,833 4,321 33,943 11,423
Supply Chain Services 4,008   3,693   16,204   15,451
Total Segment Operating Income $ 36,207   $ 23,955   $ 130,865   $ 90,124
 

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

Three Months Ended
December 31,

Twelve Months Ended
December 31,

2018     2017 2018     2017
Operating income for reportable segments $ 36,207 $ 23,955 $ 130,865 $ 90,124
Adjustment for:
Amortization of intangibles 4,011 4,323 16,586 17,266
Corporate expenses 11,767   11,145   45,828   39,368  
Total operating income $ 20,429 $ 8,487 $ 68,451 $ 33,490
Interest expense 4,978 4,481 20,937 17,054
Other expense (income), net 126   (132 ) (1,192 ) (456 )
Income before income taxes $ 15,325   $ 4,138   $ 48,706   $ 16,892  
 

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
December 31,

Twelve Months Ended
December 31,

2018     2017 2018     2017
Income before income taxes $ 15,325 $ 4,138 $ 48,706 $ 16,892
Plus: interest expense 4,978 4,481 20,937 17,054
Plus: depreciation and amortization 6,454   7,188   26,164   27,786
EBITDA 26,757   15,807   95,807   61,732
 
Plus: NCI loss(gain) before tax 37 (1 ) 157 577
Plus: Stock compensation expense 526   316   2,549   1,708
Adjusted EBITDA 27,320   16,122   98,513   64,017
 

         
DXP ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
($ thousands, except per share amounts)
   
December 31, 2018 December 31, 2017
ASSETS
Current assets:
Cash $ 40,304 $ 22,047
Restricted Cash 215 3,532
Accounts receivable 191,829 167,272
Inventories 114,830 91,413
Costs and estimated profits in excess of billings 32,514 26,915
Prepaid expenses and other current assets 4,938 5,296
Federal income taxes receivable 960   1,440
Total current assets $ 385,590 $ 317,915
Property and equipment, net 51,330 53,337
Goodwill 194,052 187,591
Other intangible assets 67,207 78,525
Other long-term assets 1,783   1,715
Total assets $ 699,962   $ 639,083
 
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt $ 3,407 $ 3,381
Trade accounts payable 87,407 80,303
Accrued wages and benefits 21,275 18,483
Customer advances 3,223 2,189
Billings in excess of costs and estimated profits 10,696 4,249
Other current liabilities 17,269   16,220
Total current liabilities $ 143,277 $ 124,825
Long-term debt, less unamortized debt issuance costs 236,979 238,643
Other long-term liabilities 2,819
Deferred income taxes 8,633   7,069
Total long-term liabilities $ 248,431   $ 245,712
Total Liabilities $ 391,708   $ 370,537
Equity:
Total DXP Enterprises, Inc. equity $ 306,848 $ 267,979
Non-controlling interest 1,406   567
Total Equity $ 308,254   $ 268,546
Total liabilities and equity $ 699,962   $ 639,083
 

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
December 31,

Twelve Months Ended
December 31,

2018     2017 2018     2017
 
Net cash provided by operating activities $ 25,998 $ 4,017 $ 35,840 $ 12,544
Less: purchase of equipment 1,618 654 9,323 2,811
Plus: proceeds from sales of assets 12     2,558  
Free cash flow $ 24,392   $ 3,363   $ 29,075   $ 9,733
 

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

Source: DXP Enterprises, Inc.

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