- 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
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 $54.3 million in 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
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200306005098/en/
Kent Yee, 713-996-4700 Senior Vice President,
CFO www.dxpe.com
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