DXP Enterprises, Inc. (NASDAQ: DXPE) today announced
financial results for the third quarter ended September 30, 2016.
The following are results for the three and nine months ended
September 30, 2016 compared to the three and nine months ended
September 30, 2015 and three months ended June 30, 2016, where
appropriate. A reconciliation of the non-GAAP financial measures is
in the back of this press release.
DXP Enterprises 2016 third quarter financial
highlights:
- Sales were $230.0 million for the third
quarter of 2016 versus $256.2 million for the second quarter of
2016, a decrease of 10.2 percent. Compared to the third quarter of
2015 sales of $303.1 million, sales were down 24.1 percent.
- Gross profit was $63.8 million, or 27.7
percent of sales for the third quarter of 2016 versus $71.6 million
for the second quarter of 2016, or 28.0 percent of sales. Gross
profit was $85.7 million or 28.3 percent of sales for the third
quarter of 2015.
- Selling, general and administrative
(SG&A) expenses were $58.9 million, or 25.6 percent of sales
for the third quarter of 2016, compared to $75.1 million or 24.8
percent of sales for the third quarter of 2015. In the second
quarter of 2016, SG&A was 24.5 percent of sales or $62.8
million.
- Earnings per diluted share for the
third quarter was $0.02 based upon 15.4 million diluted shares,
compared to a loss of $3.64 per share in the third quarter of 2015,
based on 14.4 million diluted shares. In the second quarter of
2016, earnings per diluted share was $0.34 per share on 15.3
million shares.
- Earnings before interest, taxes,
depreciation and amortization (EBITDA) for the third quarter was
$12.8 million compared to $11.3 million for the third quarter of
2015, an increase of 6.7 percent. In the second quarter of 2016,
EBITDA was $16.3 million.
- Free cash flow (cash flow from
operating activities less capital expenditures) for the third
quarter was $23.4 million or 183 percent of EBITDA.
David R. Little, Chairman and CEO, remarked, “DXP continues to
manage to the current realities and we are proud of the gains our
DXPeople have made year-to-date. We are managing costs and
producing free cash flow. We also are preparing for the future and
the next up cycle, which we believe is coming. We continue to
appreciate the hard work and perseverance from all our DXPeople.
Total DXP revenues of $230.0 million for the third quarter declined
10.2 percent sequentially. As previously outlined in our earnings
pre-release on October 19th, DXP’s third quarter performance
reflects low sales across all of DXP’s business segments during the
month of July. August and September sales were more in line with
average year-to-date monthly performance but did not make-up for
the July aberration. During the third quarter, sales were $152.0
million for Service Centers, $39.8 million for Innovative Pumping
Solutions and $38.2 million for Supply Chain Services. We are
pleased with our cost containment measures within the segments and
at corporate. Free cash flow combined with proceeds from the sale
of Vertex and equity issuance, has allowed DXP to pay down debt by
over $77 million, subsequent to quarter end. We remain confident in
our future and the opportunities ahead for DXP. Again, DXP is
poised for earnings leverage and sales growth once the market
turns.”
Mac McConnell, CFO, added, “DXP generated $23.4 million in free
cash flow during the third quarter and $31.6 million year-to-date.
During the quarter, DXP paid down debt by $28.4 million. Total debt
outstanding as of September 30, 2016 was $319.3 million. As of
November 11, 2016, total debt outstanding was $236.3 million which
includes proceeds from the sale of Vertex and the issuance of
2,484,000 shares in conjunction with DXP’s common stock offering
announced on October 25, 2016. DXP has prepaid the $30 million
mandatory payment due by December 31, 2016 and the $25 million
payment due by March 31, 2017. Additionally, DXP has prepaid the
$12.5 million amortization payment due on December 31, 2016 and
$12.0 million of the $15.625 million amortization payment due on
March 31, 2017.”
We will host a conference call regarding 2016 third quarter
financial results on the Company’s website (www.dxpe.com) Monday,
November 14, 2016 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 online archived replay will be available immediately
after the conference call at www.dxpe.com and at
www.viavid.net.
DXP Enterprises 2016 third quarter business segment
results:
- Service
Centers’ revenue for the third quarter was $152.0 million, a
decline of 6.1 percent sequentially with an 8.8 percent operating
income margin.
- Innovative
Pumping Solutions’ revenue for the third quarter was $39.8
million, a decline of 26.7 percent sequentially with a 4.1 percent
operating income margin.
- Supply Chain
Services’ revenue for the third quarter was $38.2 million, a
decline of 4.6 percent sequentially with a 10.3 percent operating
margin.
Non-GAAP Financial Measures
DXP supplements reporting of net income (loss) 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 referred
to in this press release is included below under "--Reconciliation
of Non-GAAP Measures."
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
CONSOLIDATED STATEMENTS OF
OPERATIONS
($ thousands, except per share
amounts)
(unaudited)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2016 2015 2016 2015
Sales $ 230,025 $ 303,080 $ 739,801 $ 968,362 Cost of sales
166,205 217,374 535,560
693,308 Gross profit 63,820 85,706 204,241 275,054
Selling, general and administrative expenses 58,887 75,082 192,461
232,336 B27 Working capital - 7,348 - 7,348 Impairment expense
- 58,888 - 58,888
Operating income (loss) 4,933 (55,612 ) 11,780 (23,518 )
Other expense (income), net (251 ) 327 (397 ) (67 ) Interest
expense 4,338 2,630 11,698
7,905 Income (loss) before income taxes 846
(58,569 ) 479 (31,356 ) Provision (benefit) for income taxes
664 (5,885 ) 459 4,510
Net income (loss) 182 (52,684 ) 20 (35,866 ) Less: Net income
(loss) attributable to non-controlling interest (81 )
(249 ) (301 ) (249 ) Net income (loss) attributable
to DXP Enterprises, Inc. 263 (52,435 ) 321 (35,617 ) Preferred
stock dividend 23 23 68
68 Net income (loss) attributable to common
shareholders
$
240
$
(52,458
)
$
253
$
(35,685
)
Diluted earnings (loss) per share attributable to DXP Enterprises,
Inc. $ 0.02 $ (3.64 ) $ 0.02 $ (2.48 )
Weighted average common shares and common
equivalent shares outstanding
15,440
14,422
15,369
14,394
SEGMENT DATA
($ thousands, unaudited)
Three Months Ended September
30,
Nine Months EndedSeptember
30,
2016
2015
2016
2015
Sales by Segment: Service Centers $ 152,018 $ 199,306 $ 481,352 $
639,212 Innovative Pumping Solutions 39,830 61,458 141,614 202,627
Supply Chain Services 38,177 42,316 116,835
126,523
Total Sales $ 230,025 $
303,080 $ 739,801 $ 968,362
Operating Income by Segment: Service Centers $ 13,345 $
17,957 $ 35,479 $ 61,943 Innovative Pumping Solutions 1,630 6,139
7,423 20,677 Supply Chain Services 3,929 3,821
11,611 10,835
Total Operating Income for segments
$ 18,904 $ 27,917 $
54,513 $ 93,455
Reconciliation of Operating Income for
Reportable Segments
($ thousands, unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2016
2015
2016
2015
Operating income for reportable segments $ 18,904 $ 27,917 $ 54,513
$ 93,455 Adjustment for: Amortization of intangibles 4,519 5,240
13,557 15,907 Corporate expense 9,452 12,053
29,176 34,830 Total operating
income (loss) 4,933 10,624 11,780 42,718 Interest expense 4,338
2,630 11,698 7,905 B27 Working Capital - 7,348 - 7,348 Impairment -
58,888 - 58,888 Other expense (income), net (251 )
327 (397 ) (67 ) Income (loss) before income
taxes $ 846 $ (58,569 ) $ 479 $ (31,356 )
Unaudited Reconciliation of Non-GAAP
Financial Information
The following table is a reconciliation of
EBITDA and Adjusted EBITDA**, non-GAAP financial measures, to
income before income taxes, calculated and reported in accordance
with U.S. GAAP ($ thousands)
Three Months EndedSeptember
30,
Three Months EndedJune
30,
Nine Months EndedSeptember
30,
2016 2015 2016 2016
2015 Income (loss) before income taxes $ 846 $
(58,569 ) $ 4,889 $ 479 $ (31,356 ) Plus: interest expense 4,338
2,630 3,951 11,698 7,905 Plus: depreciation and amortization 7,592
8,329 7,489 22,627 24,915 Plus: Impairment - 58,888 - - 58,888
EBITDA $ 12,776 $ 11,278
$
16,329
$ 34,804 $ 60,352 Plus: NCI loss before tax 131 380
136 486 380 Plus: Stock compensation expense 691 747 405 1,944
2,304 Plus: B27 Working Capital - 7,348 - 7,348
Adjusted EBITDA $ 13,598 $ 19,753
$ 16,870 $ 37,234 $ 70,384
**EBITDA – earnings before impairments, interest, taxes,
depreciation and amortization
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161114006380/en/
DXP Enterprises, Inc.Mac McConnell, 713-996-4700Senior Vice
President, Finance & CFOwww.dxpe.com
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