- Fiscal 2020 sales of $1.0 billion
- Fourth quarter GAAP diluted EPS of $(0.11)
- Fourth quarter and full Year adjusted EPS of $0.19 and 0.76,
respectively, excluding non-cash, one-time items and tax
normalization
- $117.4 million in cash and cash equivalents
- Free cash flow for the year of $101.1 million
- Closed six acquisitions during the year with approximately $145
million in trailing twelve months net sales
DXP Enterprises, Inc. (NASDAQ: DXPE) today announced
financial results for the fourth quarter and fiscal year ended
December 31, 2020. The following are results for the three and
twelve months ended December 31, 2020, compared to the three and
twelve months ended December 31, 2019 and the three months ended
September 30, 2020, where appropriate. A reconciliation of the
non-GAAP financial measures can be found in the back of this press
release.
Fourth Quarter 2020 financial highlights:
- Sales grew 5.7 percent sequentially to $232.7 million, compared
to $220.2 million for the third quarter of 2020.
- Earnings per diluted share for the fourth quarter was $(0.11)
based upon 17.8 million diluted shares, compared to $0.12 per share
in the fourth quarter of December 31, 2019, based on 18.4 million
diluted shares. Excluding inventory impairment charges of $11.5
million and $5.4 million in debt extinguishment costs, earnings per
diluted share was $0.19 per share, assuming a 22.9% tax rate.
- Adjusted earnings before interest, taxes, depreciation and
amortization (Adjusted EBITDA) for the fourth quarter of 2020 was
$13.6 million versus $13.7 million for the third quarter of 2020
and $14.0 million for the fourth quarter of 2019.
- Free cash flow (cash flow from operating activities less
capital expenditures) for the fourth quarter of 2020 was $15.3
million
Fiscal Year 2020 financial highlights:
- Sales were $1.0 billion, compared to $1.3 billion for
2019.
- Earnings per diluted share for 2020 of $(1.62) based upon 17.7
million basic shares, compared to $1.96 per share in 2019, based on
18.4 million diluted shares. Excluding non-cash impairment and
other one-time charges of $59.9 million and $5.4 million in debt
extinguishment costs, earning per diluted share was $0.76 per
share, assuming a 22.5% tax rate.
- Adjusted EBITDA for 2020 was $59.8 million compared to $93.6
million for 2019. Adjusted EBITDA as a percentage of sales was 5.9
percent and 7.4 percent, respectively.
- Free cash flow for the full year was $101.1 million
- Closed six acquisitions including four on December 31st, Total
Equipment Company, APO Pumps & Compressors, Corporate Equipment
Company and Pumping System, Inc.
David R. Little, Chairman and CEO commented, “We are pleased
with our fourth quarter results and strong finish to the year as
evidenced by closing FY2020 with the refinancing of our Term Loan B
and completing four acquisitions. FY2020 was a unique year and
presented corporate, societal and individual challenges. Despite
the many personal and operational hurdles imposed by the COVID-19
pandemic, DXPeople focused their efforts on creating a better
customer experience, improving our culture of belonging and driving
profitable growth in our key products and services. DXP's
resiliency is evident in our financial results; gross margin
expansion, working capital improvement, and delivering sequential
growth in the fourth quarter.
DXP's fiscal 2020 total sales were $1.0 billion. Service Center
sales were $663 million, followed by Innovative Pumping Solutions
at $188 million in sales and Supply Chain Services with $155
million in revenue."
Mr. Little continued, "During the fourth quarter, we grew 5.7
percent sequentially after our sales trough during the third
quarter. In the fourth quarter, we achieved $232.7 million in
sales, including $4.7 million from acquisitions. We delivered an
excellent fourth quarter performance in the midst of continued
virus surges and finished the year with good results on all fronts.
I am very proud of the entire DXP team for their passion,
commitment and teamwork and delivering outstanding service and
support to our customers. Our acquisitions bring more exceptional
companies to the DXP family. We are entering 2021 with a stronger
team, balance sheet and great momentum. As we turn the page to
2021, end markets are showing signs of recovery but the full year
economic outlook remains uncertain. We remain focused on those
items under our control; investing in key end markets, products and
operations; delivering a great customer experience, and building a
culture of productivity and high performance. We remain confident
in our ability to execute our strategy and deliver a strong
performance and growth in 2021 and beyond."
Kent Yee, CFO commented, "Overall, we are pleased with our
fourth quarter and full year results. Never before have we
encountered a global pandemic, mixed with societal and other
challenges. In the midst of such an environment, we generated over
$101 million in free cash flow, maintained the health and safety of
our employees and executed on our acquisition program closing four
acquisitions at year-end, bringing that to a total of six
acquisitions in fiscal 2020. We delivered financial results that
display our ability to adjust to the current levels of activity
while keeping our eyes toward the future with proactive actions
including refinancing our term loan and completing four strategic
transactions. We successfully refinanced our Term Loan B and raised
$330 million that matures in 2027. As of December 31, 2020, we had
$117.4 million in cash and cash equivalents on the balance sheet.
Our senior leverage was 3.2:1, well under our covenant limit of
5.75:1. We have momentum going to fiscal 2021 and we expect to
drive organic and acquisition driven growth."
Financial Strength and Liquidity
Net debt, calculated as total long-term debt, net of cash and
cash equivalents, on our balance sheet as of December 31, 2020, was
$212.6 million compared to $190.2 million at December 31, 2019. As
of December 31, 2020, DXP has approximately $249.2 million in
liquidity, consisting of $117.4 million in cash on hand and
approximately $131.9 million in availability under our ABL
facility.
We will host a conference call regarding December 31, 2020
fourth quarter results on the Company’s website (www.dxpe.com)
Tuesday, March 9, 2021 at 10:30 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 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,
non-GAAP net income 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, free cash flow and non-GAAP net income 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. 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 December
31,
Twelve Months Ended December
31,
2020
2019
2020
2019
Sales
$
232,689
$
295,468
$
1,005,266
$
1,267,189
Cost of sales
168,402
217,135
725,997
919,965
Gross profit
64,287
78,333
279,269
347,224
Selling, general and administrative
expenses
56,497
71,591
246,256
281,102
Impairment and other charges
11,482
—
59,883
—
Operating income (loss)
(3,692
)
6,742
(26,870
)
66,122
Other expense (income), net
455
(172
)
74
(45
)
Interest expense
8,512
4,587
20,571
19,498
Income (loss) before income taxes
(12,659
)
2,327
(47,515
)
46,669
Provision for income taxes (benefit)
(10,632
)
239
(18,441
)
10,894
Net income (loss)
(2,027
)
2,088
(29,074
)
35,775
Net (loss) income attributable to NCI*
(115
)
(88
)
(348
)
(260
)
Net income (loss) attributable to DXP
Enterprises, Inc.
(1,912
)
2,176
(28,726
)
36,035
Preferred stock dividend
22
22
90
90
Net income (loss) attributable to common
shareholders
$
(1,934
)
$
2,154
$
(28,816
)
$
35,945
Diluted earnings (loss) per share
attributable to DXP Enterprises, Inc. **
$
(0.11
)
$
0.12
$
(1.62
)
$
1.96
Weighted average common shares and common
equivalent shares outstanding
17,777
18,443
17,748
18,432
*NCI represents non-controlling
interest
** Fiscal year 2020 diluted earnings per
share for GAAP purposes was calculated using basic weighted average
shares outstanding. Due to a loss for the period, convertible
preferred stock shares are excluded from the computation of diluted
EPS because the effect will be antidilutive.
Business segment financial highlights:
- Service Centers’ revenue for the
fiscal year was $662.6 million, a decrease of 13.1 percent
year-over-year with a 10.6 percent operating income margin.
- Revenue for the fourth quarter was $161.3 million, a decrease
of 11.6 percent year-over-year with a 10.9 percent operating income
margin.
- Innovative Pumping Solutions’
revenue for the fiscal year was $188.0 million, a decrease of 38.1
percent year over year with an 10.0 percent operating income
margin.
- Revenue for the fourth quarter was $35.6 million, a decrease of
45.8 percent year-over-year.
- Supply Chain Services’ revenue for
the fiscal year was $154.7 million, a decrease of 23.2 percent
year-over-year with a 8.5 percent operating margin.
- Revenue for the fourth quarter was $35.8 million, a decrease of
24.4 percent year-over-year with a 9.0 percent operating income
margin.
SEGMENT DATA
($ thousands, unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
Sales
2020
2019
2020
2019
Service Centers
$
161,284
$
182,372
$
662,617
$
762,256
Innovative Pumping Solutions
35,615
65,735
187,991
303,655
Supply Chain Services
35,790
47,361
154,658
201,278
Total DXP Sales
$
232,689
$
295,468
$
1,005,266
$
1,267,189
Three Months Ended December
31,
Twelve Months Ended December
31,
Operating Income
2020
2019
2020
2019
Service Centers
$
17,643
$
19,497
$
70,385
$
86,778
Innovative Pumping Solutions
2,635
(29
)
18,715
28,895
Supply Chain Services
3,210
3,465
13,218
14,445
Total segments operating income
$
23,488
$
22,933
$
102,318
$
130,118
Reconciliation of Operating
Income for Reportable Segments
($ thousands, unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2020
2019
2020
2019
Operating income for reportable
segments
$
23,488
$
22,933
$
102,318
$
130,118
Adjustment for:
Impairment and other charges
11,482
—
59,883
—
Amortization of intangibles
2,991
3,651
12,287
15,074
Corporate expenses
12,707
12,540
57,018
48,922
Total operating income (loss)
$
(3,692
)
$
6,742
$
(26,870
)
$
66,122
Interest and other financing expenses
8,512
4,587
20,571
19,498
Other expense (income), net
455
(172
)
74
(45
)
Income (loss) before income
taxes
$
(12,659
)
$
2,327
$
(47,515
)
$
46,669
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 December
31,
Twelve Months Ended December
31,
2020
2019
2020
2019
Income (loss) before income taxes
(12,659
)
2,327
$
(47,515
)
$
46,669
Plus: interest and other financing
expenses
8,512
4,587
20,571
19,498
Plus: depreciation and amortization
5,389
6,481
22,683
25,174
EBITDA
$
1,242
$
13,395
$
(4,261
)
$
91,341
Plus: NCI loss income before tax*
232
114
632
342
Plus: Impairment and other charges
11,482
—
59,883
—
Plus: stock compensation expense
662
461
3,532
1,963
Adjusted EBITDA
$
13,618
$
13,970
$
59,786
$
93,646
* NCI represents non-controlling
interest
XP ENTERPRISES, INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
($ thousands, except per share
amounts)
December 31, 2020
December 31, 2019
ASSETS
Current assets:
Cash
$
117,353
$
54,203
Restricted cash
91
124
Accounts receivable, net of allowances for
doubtful accounts
163,429
187,116
Inventories
97,071
129,364
Costs and estimated profits in excess of
billings
18,459
32,455
Prepaid expenses and other current
assets
4,548
4,223
Federal income taxes receivable
5,632
996
Total current assets
$
406,583
$
408,481
Property and equipment, net
56,899
63,703
Goodwill
248,339
194,052
Other intangible assets, net of
accumulated amortization
80,088
52,582
Operating lease right-of-use assets
55,188
66,191
Other long-term assets
4,764
3,211
Total assets
$
851,861
$
788,220
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt
$
3,300
$
2,500
Trade accounts payable
75,744
76,438
Accrued wages and benefits
20,621
23,412
Customer advances
3,688
3,408
Billings in excess of costs and estimated
profits
4,061
11,871
Current-portion operating lease
liabilities
15,891
17,603
Other current liabilities
20,834
12,939
Total current liabilities
$
144,139
$
148,171
Long-term debt, less unamortized debt
issuance costs
317,139
235,419
Long-term operating lease liabilities
38,010
48,605
Other long-term liabilities
2,930
1,205
Deferred income taxes
1,777
9,872
Total long-term liabilities
$
359,856
$
295,101
Total Liabilities
$
503,995
$
443,272
Equity:
Total DXP Enterprises, Inc.
equity
347,068
343,802
Non-controlling interest
798
1,146
Total Equity
$
347,866
$
344,948
Total liabilities and equity
$
851,861
$
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 December
31,
Twelve Months Ended December
31,
2020
2019
2020
2019
Net cash from operating activities
$
15,435
$
33,822
$
107,675
$
41,306
Less: purchases of property and
equipment
(142
)
(7,873
)
(6,672
)
(22,120
)
Plus: proceeds from sales of property and
equipment
—
—
123
35
Free cash flow
$
15,293
$
25,949
$
101,126
$
19,221
The following table is a reconciliation of
adjusted net income, a non-GAAP financial measure, to net income,
calculated and reported in accordance with U.S. GAAP.
Three Months Ended December
31,
Twelve Months Ended December
31,
2020
2019
2020
2019
GAAP Net Income (Loss) :
$
(1,934
)
$
2,176
$
(28,816
)
$
36,035
Impairment and other charges
11,482
—
59,883
—
Extinguishment of debt in connection with
refinancing
5,443
—
5,443
—
Adjustment for taxes*
(11,527
)
—
(22,363
)
—
Non-GAAP net income
$
3,464
$
2,176
$
14,147
$
36,035
Weighted average common shares and
common equivalent shares outstanding **
Basic
17,777
17,603
17,748
17,592
Diluted
17,777
18,443
17,748
18,432
Diluted earnings (loss) per
share:
GAAP **
$
(0.11
)
$
0.12
$
(1.62
)
$
1.96
Non-GAAP
$
0.19
$
0.12
$
0.76
$
1.96
* Adjustment for taxes relates to the tax
effects of the adjustments that we incorporated into non-GAAP
measures in order to provide a more meaningful measure of non-GAAP
net income. Also, we have included an adjustment for the
normalizing of tax credits and adjustments. For tax purposes the
year-to-date effective tax rate of 22.5 percent was applied to the
impairment and other charges for conservative purposes.
** Fiscal year 2020 diluted earnings per
share for GAAP purposes was calculated using basic weighted average
shares outstanding. Due to a loss for the period, convertible
preferred stock shares are excluded from the computation of diluted
EPS because the effect will be antidilutive.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210309005404/en/
Kent Yee Senior Vice President, CFO 713-996-4700
www.dxpe.com
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