- $78.8 million in cash and cash equivalents
- $251.4 million in sales
- GAAP diluted EPS of $0.12
- Cash flow from operating activities of $63.4 million
- Free cash flow for the quarter of $61.6 million
DXP Enterprises, Inc. (NASDAQ: DXPE) today announced
financial results for the second quarter ended June 30, 2020. The
following are results for the three and six months ended June 30,
2020, compared to the three and six months ended June 30, 2019. A
reconciliation of the non-GAAP financial measures can be found in
the back of this press release.
Second Quarter 2020 financial highlights:
- Sales were $251.4 million, compared to $333.3 million for the
second quarter of 2019.
- Earnings per diluted share for the second quarter was $0.12
based upon 18.6 million diluted shares, compared to $0.73 per share
in the second quarter of June 30, 2019, based on 18.4 million
diluted shares.
- Earnings before interest, taxes, depreciation and amortization
(EBITDA) for the second quarter was $12.6 million compared to $28.7
million for the second quarter of 2019.
- Free cash flow (cash flow from operating activities less
capital expenditures) for the second quarter was $61.6 million, or
489.5% of EBITDA.
David R. Little, Chairman and CEO, commented, "Before turning to
our results, I would like to acknowledge our employees' resilience
in the face of this historic COVID-19 pandemic and subsequent
decline in activity levels in our oil and gas markets. As we have
battled the pandemic for the last four months, our DXPeople have
shown outstanding adaptability to the new working environment. They
have embraced new work practices to mitigate contamination risks,
while delivering outstanding product and service quality for our
customers. As the pandemic lingers, we will continue to balance
both safety and business priorities and strive to capture more
market share. I was pleased with our team's execution on
maintaining gross margins, cost discipline and our strong free cash
flow generation."
Mr. Little continued, "During the second quarter, we achieved
$251.4 million in sales, including $4.5 million from acquisitions.
In terms of our business segments for the second quarter, sales
were $153.8 million for Service Centers, $60.5 million for
Innovative Pumping Solutions and $37.1 million for Supply Chain
Services. Although the majority of lockdowns have been easing and
economic activity is likely near trough levels, visibility on the
economic outlook remains extremely limited. Specifically, the risk
of a second wave of virus cases, the reinstitution of select
geographic lockdowns, the upcoming election and the risk of
lingering high unemployment create an uncertain economic
environment that likely persists through the rest of 2020 based
upon what we know today. Our results demonstrate a significant and
sustainable reset to the power of our business to generate positive
earnings and free cash flow and capture market share for our
future."
Kent Yee, CFO, commented, “DXP's second quarter performance in a
tough and unique market shows we can execute quickly and
aggressively to deliver financial results and free cash flow
despite a severe drop in activity. DXP generated $61.6 million in
free cash flow for the quarter. Additionally, DXP paid down debt by
$15.6 million. Our second quarter EBITDA for debt covenant purposes
was $15.6 million. As of June 30, 2020, we had $78.8 million in
cash and cash equivalents on the balance sheet. Our senior leverage
was 2.4:1, well under the Q2 covenant limit of 4.5:1."
Financial Strength and Liquidity
Net debt, calculated as long-term debt, net of cash and cash
equivalents, on our balance sheet as of June 30, 2020, was down to
$149.4 million compared to $221.6 million at June 30, 2019. As of
June 30, 2020, DXP has approximately $209.7 million in liquidity,
consisting of $78.7 million in cash on hand and approximately
$131.0 million in availability under our ABL facility.
We will host a conference call regarding June 30, 2020 second
quarter results on the Company’s website (www.dxpe.com) Thursday,
August 6, 2020 at 10 am CDT. 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.
Non-GAAP Financial Measures
DXP supplements reporting of net income with non-GAAP
measurements, including EBITDA, adjusted EBITDA, free cash flow and
net debt. 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. These
forward-looking statements include without limitation those about
the Company’s expectations regarding the impact of the COVID-19
pandemic and the impact of low commodity prices of oil and gas; the
Company’s business, the Company’s future profitability, cash flow,
liquidity, and growth. 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; decreases in oil and natural gas
prices; decreases in oil and natural gas industry expenditure
levels, which may result from decreased oil and natural gas prices
or other factors; ability to obtain needed capital, dependence on
existing management, leverage and debt service, domestic or global
economic conditions, economic risks related to the impact of
COVID-19, ability to manage changes and the continued health or
availability of management personnel 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. More
information on these risks and other potential factors that could
affect the Company’s business and financial results is included in
the Company’s filings with the SEC, including in the “Risk Factors”
and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” sections of the Company’s most recently
filed periodic reports on Form 10-K and Form 10-Q and subsequent
filings. The Company assumes no obligation to update any
forward-looking statements or information, which speak as of their
respective dates.
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,
2020
2019
2020
2019
Sales
$
251,401
$
333,318
$
552,384
$
644,543
Cost of sales
181,705
241,331
398,703
468,356
Gross profit
69,696
91,987
153,681
176,187
Selling, general and administrative
expenses
62,943
69,140
136,013
138,524
Operating income
6,753
22,847
17,668
37,663
Other expense (income), net
133
185
(701
)
152
Interest expense
3,930
4,885
8,307
9,925
Income before income taxes
2,690
17,777
10,062
27,586
Provision for income taxes
610
4,427
2,334
7,049
Net income
2,080
13,350
7,728
20,537
Net (loss) income attributable to NCI*
(62
)
(109
)
(124
)
(213
)
Net income attributable to DXP
Enterprises, Inc.
2,142
13,459
7,852
20,750
Preferred stock dividend
22
22
45
45
Net income attributable to common
shareholders
$
2,120
$
13,437
$
7,807
$
20,705
Diluted earnings per share attributable to
DXP Enterprises, Inc.
$
0.12
$
0.73
$
0.42
$
1.13
Weighted average common shares and common
equivalent shares outstanding
18,575
18,436
18,559
18,421
*NCI represents non-controlling
interest
Business segment financial highlights:
- Service Centers’ revenue for the
second quarter was $153.8 million, a decrease of 23.1 percent
year-over-year with a 8.9 percent operating income margin.
- Innovative Pumping Solutions’
revenue for the second quarter was $60.5 million, a decrease of
25.4 percent year-over-year with a 14.2 percent operating income
margin.
- Supply Chain Services’ revenue for
the second quarter was $37.1 million, a decrease of 29.1 percent
year-over-year with a 9.0 percent operating income margin.
SEGMENT DATA
($ thousands, unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
Sales
2020
2019
2020
2019
Service Centers
$
153,848
$
199,978
$
336,433
$
386,157
Innovative Pumping Solutions
60,479
81,028
130,500
155,751
Supply Chain Services
37,074
52,312
85,451
102,635
Total DXP Sales
$
251,401
$
333,318
$
552,384
$
644,543
Three Months Ended June
30,
Six Months Ended June
30,
Operating Income
2020
2019
2020
2019
Service Centers
$
13,717
$
23,230
$
30,643
$
42,210
Innovative Pumping Solutions
8,565
12,028
18,993
18,827
Supply Chain Services
3,353
3,784
7,107
7,870
Total segments operating income
$
25,635
$
39,042
$
56,743
$
68,907
Reconciliation of Operating
Income for Reportable Segments
($ thousands, unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Operating income for reportable
segments
$
25,635
$
39,042
$
56,743
$
68,907
Adjustment for:
Amortization of intangibles
3,046
3,803
6,243
7,617
Corporate expenses
15,836
12,392
32,832
23,627
Total operating income
$
6,753
$
22,847
$
17,668
$
37,663
Interest expense
3,930
4,885
8,307
9,925
Other income, net
133
185
(701)
152
Income before income taxes
$
2,690
$
17,777
$
10,062
$
27,586
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 taxes, calculated and reported in accordance with U.S.
GAAP.
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Income before income taxes
2,690
17,777
$
10,062
$
27,586
Plus: interest expense
3,930
4,885
8,307
9,925
Plus: depreciation and amortization
5,965
6,065
11,990
12,271
EBITDA
$
12,585
$
28,727
$
30,359
$
49,782
Plus: NCI loss (gain) income before
tax*
221
(145)
303
283
Plus: stock compensation expense
983
524
1,887
1,029
Adjusted EBITDA
$
13,789
$
29,106
$
32,549
$
51,094
* NCI represents non-controlling
interest
DXP ENTERPRISES, INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
($ thousands, except per share
amounts)
As of
June 30, 2020
December 31, 2019
ASSETS
Current assets:
Cash
$
78,678
$
54,203
Restricted cash
91
124
Accounts receivable, net of allowances for
doubtful accounts
154,804
187,116
Inventories
131,828
129,364
Costs and estimated profits in excess of
billings
30,376
32,455
Prepaid expenses and other current
assets
6,120
4,223
Federal income taxes receivable
332
996
Total current assets
$
402,229
$
408,481
Property and equipment, net
62,962
63,703
Goodwill
202,502
194,052
Other intangible assets, net of
accumulated amortization
50,540
52,582
Operating lease right-of-use assets
61,187
66,191
Other long-term assets
3,710
3,211
Total assets
$
783,130
$
788,220
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt
$
2,500
$
2,500
Trade accounts payable
82,407
76,438
Accrued wages and benefits
21,789
23,412
Customer advances
5,437
3,408
Billings in excess of costs and estimated
profits
3,569
11,871
Current-portion operating lease
liabilities
15,879
17,603
Other current liabilities
17,638
12,939
Total current liabilities
$
149,219
$
148,171
Long-term debt, less unamortized debt
issuance costs
220,107
235,419
Long-term operating lease liabilities
44,158
48,605
Other long-term liabilities
1,027
1,205
Deferred income taxes
10,774
9,872
Total long-term liabilities
$
276,066
$
295,101
Total Liabilities
$
425,285
$
443,272
Equity:
Total DXP Enterprises, Inc.
equity
356,823
343,802
Non-controlling interest
1,022
1,146
Total Equity
$
357,845
$
344,948
Total liabilities and equity
$
783,130
$
788,220
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,
2020
2019
2020
2019
Net cash from (used in) operating
activities
$
63,376
$
1,850
$
61,764
$
(3,460
)
Less: purchases of property and
equipment
1,898
6,272
5,133
8,584
Plus: proceeds from sales of property and
equipment
123
5
123
34
Free cash flow
$
61,601
$
(4,417
)
$
56,754
$
(12,010
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200806005357/en/
Kent Yee, 713-996-4700 Senior Vice President, CFO
www.dxpe.com
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