Press Release Details

DXP Enterprises Announces Fourth Quarter and Fiscal 2019 Results

03/06/2020
  • Fiscal 2019 sales of $1.3 billion, up 4.2%,
  • Full year GAAP diluted EPS of $1.96
  • Net income of $35.9 million
  • $91.3 million in earnings before interest, taxes, depreciation and amortization (“EBITDA”)
  • $13 million in growth capital expenditures
  • Free cash flow of $19.2 million

HOUSTON--(BUSINESS WIRE)-- DXP Enterprises, Inc. (NASDAQ: DXPE) today announced financial results for the fourth quarter and year ended December 31, 2019. The following are results for the three months and twelve months ended December 31, 2019, compared to the three months and twelve months ended December 31, 2018. A reconciliation of the non-GAAP financial measures can be found in the back of this press release.

Fourth Quarter 2019 financial highlights:

  • Sales decreased 5.0 percent to $295.5 million, compared to $311.0 million for the fourth quarter of 2018.
  • Earnings per diluted share for the fourth quarter was $0.12 based upon 18.4 million diluted shares, compared to $0.60 per share in the fourth quarter of 2018, based on 18.4 million diluted shares.

Fiscal Year 2019 financial highlights:

  • Sales increased 4.2 percent to $1.3 billion, compared to $1.2 billion for 2018.
  • Earnings per diluted share for 2019 of $1.96 based upon 18.4 million diluted shares, compared to $1.94 per share in 2018, based on 18.4 million diluted shares.
  • Earnings before interest, taxes, depreciation and amortization (EBITDA) for 2019 was $91.3 million compared to $95.8 million for 2018. EBITDA as a percentage of sales was 7.2 percent and 7.9 percent, respectively.
  • $13 million in growth capital expenditures

David R. Little, Chairman and CEO commented, “DXP reported fiscal 2019 sales of $1.3 billion, a 4.2 percent growth over 2018. We invested in expanding our facilities, products and corporate support capabilities in FY 2019. Overall performance was positive with more strength during the first half of the year versus the third and fourth quarter. Despite the changing market environment, we made a decision to invest in the business and position DXP to continue to take market share. We believe our financial performance during the second half of the year reflects our oil and gas customers reaching their budget limits towards the end of the third quarter and remaining disciplined on the capital spending side through the fourth quarter. Our IPS segment was impacted the most but we expect to show improvement as we move through fiscal 2020. Underlying demand in our end markets has wavered but we continue to take market share and focus on execution. Fiscal 2019 sales for Supply Chain Services grew 15.4 percent, Innovative Pumping Solutions grew 4.1 percent and Service Centers grew 1.6 percent. DXP produced total EBITDA of $91.3 million in fiscal 2019 along with $26 million in free cash flow generation during the fourth quarter.

“We opened Fiscal 2020 closing two acquisitions and we will continue to focus on delivering margin expansion, strong returns on capital and free cash flow generation. We remain committed to taking market share, growing the business, both organically and through acquisitions. We are focused on providing the right solutions for our customers, while continuously improving our operational performance even in a changing end market backdrop. Fiscal 2020 will be a year where we cannot take anything for granted but focus on executing our strategy and business plan.”

Kent Yee, CFO commented, “Fiscal 2019 financial performance reflects our plan to invest in the business while operating in a changing macro and industry environment. During the first and second quarter, we were on pace to grow the business 8 percent on a year-over-year basis. In the second half of fiscal 2019, we essentially grew the business 0.6 percent. Total sales for the fiscal year grew 4.2 percent. Our fiscal 2019 diluted earnings per share was $1.96. We spent $22.1 million on capital expenditures, of which $13.1 million was growth related versus maintenance. Our balance sheet remains positioned to support the business over the long term. DXP ended the year with $54.3millionin cash on the balance sheet and net debt of $190.2 million. DXP's secured leverage ratio or net debt to EBITDA was 2.23 :1.0. We have momentum going into fiscal 2020, closing two acquisitions and we expect to drive more acquisition growth.”

We will host a conference call regarding 2019 fourth quarter and year-ended results on the Company’s website (www.dxpe.com) Friday, March 6, 2020 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.

Business Segment financial highlights:

  • Service Centers' revenue for the fiscal year was $762.3 million, an increase of 1.6 percent year-over-year with a 11.4 percent operating income margin.
    • Revenue for the fourth quarter was $182.4 million, a decrease of 5.7 percent year-over-year with a 10.7 percent operating income margin.
  • Innovative Pumping Solutions’ revenue for the fiscal year was $303.7 million, an increase of 4.1 percent year over year with an 9.5 percent operating income margin.
    • Revenue for the fourth quarter was $65.7 million, a decrease of 10.1 percent year-over-year with a flat or 0.0 percent operating income margin.
  • Supply Chain Services’ revenue for the fiscal year was $201.3 million, an increase of 15.4 percent year-over-year with a 7.2 percent operating margin.
    • Revenue for the fourth quarter was $47.4 million, an increase of 6.4 percent year-over-year with a 7.3 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 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,

 

 

2019

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

Sales

 

$

295,468

 

$

311,006

 

 

$

1,267,189

 

 

$

1,216,197

 

Cost of sales

 

217,135

 

224,429

 

 

919,965

 

 

883,989

 

Gross profit

 

78,333

 

86,577

 

 

347,224

 

 

332,208

 

Selling, general and administrative expenses

 

71,591

 

66,148

 

 

281,102

 

 

263,757

 

Operating income

 

6,742

 

20,429

 

 

66,122

 

 

68,451

 

Other (income) expense, net

 

(172

)

126

 

 

(45

)

 

(1,192

)

Interest expense

 

4,587

 

4,978

 

 

19,498

 

 

20,937

 

Income before income taxes

 

2,327

 

15,325

 

 

46,669

 

 

48,706

 

Provision for (benefit from) income taxes

 

239

 

4,223

 

 

10,894

 

 

13,185

 

Net income

 

2,088

 

11,102

 

 

35,775

 

 

35,521

 

Net income (loss) attributable to NCI*

 

(88

)

 

(20

)

 

(260

)

 

(111

)

Net income attributable to DXP Enterprises, Inc.

 

2,176

 

11,122

 

 

36,035

 

 

35,632

 

Preferred stock dividend

 

22

 

22

 

 

90

 

 

90

 

Net income attributable to common shareholders

 

$

2,154

 

$

11,100

 

 

$

35,945

 

 

$

35,542

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to DXP Enterprises, Inc.

 

$

0.12

 

$

0.60

 

 

$

1.96

 

 

$

1.94

 

 

 

 

 

 

 

 

 

Weighted average common shares and common equivalent shares outstanding

 

18,443

 

18,410

 

 

18,432

 

 

18,393

 

 

 

 

 

 

 

 

 

*NCI represents non-controlling interest

SEGMENT DATA

($ thousands, unaudited)

 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

Sales

2019

 

2018

 

2019

 

2018

Service Centers

$

182,372

 

 

$

193,343

 

 

$

762,256

 

 

$

750,044

 

Innovative Pumping Solutions

65,735

 

 

73,137

 

 

303,655

 

 

291,697

 

Supply Chain Services

47,361

 

 

44,526

 

 

201,278

 

 

174,456

 

Total DXP Sales

$

295,468

 

 

$

311,006

 

 

$

1,267,189

 

 

$

1,216,197

 

 

 

 

 

 

 

 

 

 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

Operating Income

2019

 

2018

 

2019

 

2018

Service Centers

$

19,497

 

 

$

22,366

 

 

$

86,778

 

 

$

80,718

 

Innovative Pumping Solutions

(29

)

 

9,833

 

 

28,895

 

 

33,943

 

Supply Chain Services

3,465

 

 

4,008

 

 

14,445

 

 

16,204

 

Total Segment Operating Income

$

22,933

 

 

$

36,207

 

 

$

130,118

 

 

$

130,865

 

Reconciliation of Operating Income for Reportable Segments

($ thousands, unaudited)

 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

 

2019

 

2018

 

2019

 

2018

Operating income for reportable segments

$

22,933

 

 

$

36,207

 

 

$

130,118

 

 

$

130,865

 

Adjustment for:

 

 

 

 

 

 

 

Amortization of intangibles

3,651

 

 

4,011

 

 

15,074

 

 

16,586

 

Corporate expenses

12,540

 

 

11,767

 

 

48,922

 

 

45,828

 

Total operating income

$

6,742

 

 

$

20,429

 

 

$

66,122

 

 

$

68,451

 

Interest expense

4,587

 

 

4,978

 

 

19,498

 

 

20,937

 

Other expense (income), net

(172

)

 

126

 

 

(45

)

 

(1192

)

Income before income taxes

$

2,327

 

 

$

15,325

 

 

$

46,669

 

 

$

48,706

 

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,

 

2019

 

2018

 

2019

 

2018

Income before income taxes

$

2,327

 

 

$

15,325

 

 

$

46,669

 

 

$

48,706

 

Plus: interest expense

4,587

 

 

4,978

 

 

19,498

 

 

20,937

 

Plus: depreciation and amortization

6,481

 

 

6,454

 

 

25,174

 

 

26,164

 

EBITDA

13,395

 

 

26,757

 

 

91,341

 

 

95,807

 

 

 

 

 

 

 

 

 

Plus: NCI loss(gain) before tax

114

 

 

37

 

 

342

 

 

157

 

Plus: Stock compensation expense

461

 

 

526

 

 

1,963

 

 

2,549

 

Adjusted EBITDA

13,970

 

 

27,320

 

 

93,646

 

 

98,513

 

DXP ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

($ thousands, except per share amounts)

 

December 31, 2019

 

December 31, 2018

ASSETS

 

 

 

Current assets:

 

 

 

Cash

$

54,203

 

 

$

40,304

 

Restricted Cash

124

 

 

215

 

Accounts receivable

187,116

 

 

191,829

 

Inventories

129,364

 

 

114,830

 

Costs and estimated profits in excess of billings

32,455

 

 

32,514

 

Prepaid expenses and other current assets

4,223

 

 

4,938

 

Federal income taxes receivable

996

 

 

960

 

Total current assets

$

408,481

 

 

$

385,590

 

Property and equipment, net

63,703

 

 

51,330

 

Goodwill

194,052

 

 

194,052

 

Other intangible assets, net of accumulated amortization

52,582

 

 

67,207

 

Operating lease ROU assets

66,191

 

 

 

Other long-term assets

3,211

 

 

1,783

 

Total assets

$

788,220

 

 

$

699,962

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities:

 

 

 

Current maturities of long-term debt

$

2,500

 

 

$

3,407

 

Trade accounts payable

76,438

 

 

87,407

 

Accrued wages and benefits

23,412

 

 

21,275

 

Customer advances

3,408

 

 

3,223

 

Billings in excess of costs and estimated profits

11,871

 

 

10,696

 

Short-term operating lease liabilities

17,603

 

 

 

Other current liabilities

12,939

 

 

17,269

 

Total current liabilities

$

148,171

 

 

$

143,277

 

Long-term debt, less unamortized debt issuance costs

235,419

 

 

236,979

 

Long-term operating lease liabilities

48,605

 

 

 

Other long-term liabilities

1,205

 

 

2,819

 

Deferred income taxes

9,872

 

 

8,633

 

Total long-term liabilities

$

295,101

 

 

$

248,431

 

Total Liabilities

$

443,272

 

 

$

391,708

 

Equity:

 

 

 

Total DXP Enterprises, Inc. equity

$

343,802

 

 

$

306,848

 

Non-controlling interest

1,146

 

 

1,406

 

Total Equity

$

344,948

 

 

$

308,254

 

Total liabilities and equity

$

788,220

 

 

$

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
December 31,

 

Twelve Months Ended
December 31,

 

 

2019

 

2018

 

2019

 

2018

Net cash provided by operating activities

 

$

33,823

 

 

$

25,998

 

 

$

41,307

 

 

$

35,840

 

Less: purchase of equipment

 

7,873

 

 

1,618

 

 

22,120

 

 

9,323

 

Plus: proceeds from sales of assets

 

 

 

12

 

 

35

 

 

2,558

 

Free cash flow

 

$

25,950

 

 

$

24,392

 

 

$

19,222

 

 

$

29,075

 

 

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

Source: DXP Enterprises, Inc.

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