EX-99.1 2 earningsrelease93019.htm EXHIBIT 99.1 Exhibit
dxplogo.jpg
 
NEWS RELEASE
CONTACT: Kent Yee
Senior Vice President, CFO
www.dxpe.com
THE INDUSTRIAL DISTRIBUTION EXPERTS

DXP ENTERPRISES REPORTS THIRD QUARTER 2019 RESULTS

•
$327.2 million in sales, up 6.2 percent, compared to $308.0 million in sales in Q3 2018
•
Net income of $13.1 million versus $8.4 million compared to Q3 2018
•
GAAP diluted EPS of $0.71, compared to $0.46 in Q3 2018
•
$28.2 million in earnings before interest, taxes, depreciation and amortization (“EBITDA”)

Houston, TX – November 6, 2019 – DXP Enterprises, Inc. (NASDAQ: DXPE) today announced financial results for the third quarter ended September 30, 2019. The following are results for the three months and nine months ended September 30, 2019, compared to the three months and nine months ended September 30, 2018. A reconciliation of the non-GAAP financial measures can be found in the back of this press release.

Third Quarter 2019 financial highlights:

•
Sales increased 6.2 percent to $327.2 million, compared to $308.0 million for the third quarter of 2018.
•
Earnings per diluted share for the third quarter was $0.71 based upon 18.4 million diluted shares, compared to $0.46 per share in the third quarter of 2018, based on 18.4 million diluted shares.
•
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the third quarter was $28.2 million compared to $23.2 million for the third quarter of 2018, an increase of 21.4 percent.

David R. Little, Chairman and CEO commented, “DXP reported excellent sales and net income for the third quarter.  We are pleased with our results, which reflect continued execution of our strategy and a focus on being customer driven experts in MROP solutions.  Underlying demand in our end markets has wavered but we continue to take market share and focus on execution.  We achieved 6.2 percent sales growth, maintained EBITDA margins and drove outstanding diluted earnings per share growth. During the third quarter of 2019, sales were $193.7 million for Service Centers, $82.2 million for Innovative Pumping Solutions and $51.3 million for Supply Chain Services.  Business segment operating income increased 15.1 percent year-over-year.  DXP’s third quarter 2019 total sales were $327.2 million and EBITDA grew 21.4 percent year-over-year.  Overall, we maintained margin performance, continued to improve cash flow and executed in a changing end market backdrop.  We will remain focused on growing the top-line and bottom-line as we move into fiscal 2020.”
   
Kent Yee, CFO, commented, “We are pleased with 6.2 percent sales growth and 8.6 percent EBITDA margins.  This translated into $0.71 diluted earnings per share or 54.3 percent earnings growth year-over-year. Total debt outstanding as of September 30, 2019 was $245.0 million.  DXP’s secured leverage ratio or net debt to EBITDA was 2.0:1.0.  Our strong execution with our focus on sales growth and margin improvement, delivered strong earnings, cash flow production and continues to position us to continue to drive shareholder value.”
      
We will host a conference call regarding 2019 third quarter results on the Company’s website (www.dxpe.com) Thursday, November 7, 2019 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.


Page 1
dxplogo.jpg
 
NEWS RELEASE
CONTACT: Kent Yee
Senior Vice President, CFO
www.dxpe.com
THE INDUSTRIAL DISTRIBUTION EXPERTS


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, 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.

Page 2
dxplogo.jpg
 
NEWS RELEASE
CONTACT: Kent Yee
Senior Vice President, CFO
www.dxpe.com
THE INDUSTRIAL DISTRIBUTION EXPERTS




DXP ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ thousands, except per share amounts)
   
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Sales
 
$
327,178

 
$
308,028

 
$
971,721

 
$
905,191

Cost of sales
 
234,474

 
223,958

 
702,830

 
659,560

Gross profit
 
92,704

 
84,070

 
268,891

 
245,631

Selling, general and administrative expenses
 
70,987

 
67,257

 
209,511

 
197,609

Operating income
 
21,717

 
16,813

 
59,380

 
48,022

Other (income) expense, net
 
(25
)
 
120

 
127

 
(1,318
)
Interest expense
 
4,986

 
4,781

 
14,911

 
15,959

Income before income taxes
 
16,756

 
11,912

 
44,342

 
33,381

Provision for income taxes
 
3,606

 
3,550

 
10,655

 
8,962

Net income
 
13,150

 
8,362

 
33,687

 
24,419

Net income (loss) attributable to NCI*
 
41

 
(35
)
 
(172
)
 
(91
)
Net income attributable to DXP Enterprises, Inc.
 
$
13,109

 
$
8,397

 
$
33,859

 
$
24,510

Preferred stock dividend
 
23

 
23

 
68

 
68

Net income attributable to common shareholders
 
$
13,086

 
$
8,374

 
$
33,791

 
$
24,442

Diluted earnings per share attributable to DXP Enterprises, Inc.
 
$
0.71

 
$
0.46

 
$
1.84

 
$
1.33

Weighted average common shares and common equivalent shares outstanding
 
18,442

 
18,404

 
18,428

 
18,387

 
 
 
 
 
 
 
 
 
*NCI represents non-controlling interest





Page 3
dxplogo.jpg
 
NEWS RELEASE
CONTACT: Kent Yee
Senior Vice President, CFO
www.dxpe.com
THE INDUSTRIAL DISTRIBUTION EXPERTS


Business segment financial highlights:

•
Service Centers’ revenue for the third quarter was $193.7 million, an increase of 3.2 percent year-over-year with a 12.9 percent operating income margin.
•
Innovative Pumping Solutions’ revenue for the third quarter was $82.2 million, an increase of 7.2 percent year-over-year with a 12.3 percent operating income margin.
•
Supply Chain Services’ revenue for the third quarter was $51.3 million, an increase of 17.6 percent year-over-year with a 6.1 percent operating income margin.

SEGMENT DATA
($ thousands, unaudited)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Sales
2019
 
2018
 
2019
 
2018
Service Centers
$
193,727

 
$
187,763

 
$
579,884

 
$
556,700

Innovative Pumping Solutions
82,169

 
76,662

 
237,920

 
218,561

Supply Chain Services
51,282

 
43,603

 
153,917

 
129,930

Total DXP Sales
$
327,178

 
$
308,028

 
$
971,721

 
$
905,191

 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Operating Income
2019
 
2018
 
2019
 
2018
Service Centers
$
25,071

 
$
20,590

 
$
67,281

 
$
58,353

Innovative Pumping Solutions
10,097

 
8,773

 
28,924

 
24,109

Supply Chain Services
3,110

 
3,886

 
10,980

 
12,196

Total segments operating income
$
38,278

 
$
33,249

 
$
107,185

 
$
94,658






Page 4
dxplogo.jpg
 
NEWS RELEASE
CONTACT: Kent Yee
Senior Vice President, CFO
www.dxpe.com
THE INDUSTRIAL DISTRIBUTION EXPERTS



Reconciliation of Operating Income for Reportable Segments
($ thousands, unaudited)


 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Operating income for reportable segments
$
38,278

 
$
33,249

 
$
107,185

 
$
94,658

Adjustment for:
 
 
 
 
 
 
 
Amortization of intangibles
3,806

 
4,098

 
11,424

 
12,575

Corporate expenses
12,755

 
12,338

 
36,381

 
34,061

Total operating income
21,717

 
16,813

 
59,380

 
48,022

Interest expense
4,986

 
4,781

 
14,911

 
15,959

Other expense (income), net
(25
)
 
120

 
127

 
(1,318
)
Income before income taxes
$
16,756

 
$
11,912

 
$
44,342

 
$
33,381





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 September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Income before income taxes
$
16,756

 
$
11,912

 
$
44,342

 
$
33,381

Plus: interest expense
4,986

 
4,781

 
14,911

 
15,959

Plus: depreciation and amortization
6,422

 
6,506

 
18,693

 
19,710

 
 
 
 
 
 
 
 
EBITDA
$
28,164

 
$
23,199

 
$
77,946

 
$
69,050

 
 
 
 
 
 
 
 
Plus: NCI (income) loss before tax
(55
)
 
64

 
228

 
120

Plus: Stock compensation expense
473

 
526

 
1,502

 
2,023

 
 
 
 
 
 
 
 
Adjusted EBITDA
$
28,582

 
$
23,789

 
$
79,676

 
$
71,193




Page 5
dxplogo.jpg
 
NEWS RELEASE
CONTACT: Kent Yee
Senior Vice President, CFO
www.dxpe.com
THE INDUSTRIAL DISTRIBUTION EXPERTS


DXP ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
($ thousands, except per share amounts)


 
September 30, 2019
 
December 31, 2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash
$
28,436

 
$
40,304

Restricted Cash
124

 
215

Accounts receivable, net of allowances for doubtful accounts
210,098

 
191,829

Inventories
131,916

 
114,830

Costs and estimated profits in excess of billings
33,898

 
32,514

Prepaid expenses and other current assets
6,328

 
4,938

Federal income taxes receivable
1,518

 
960

Total current assets
412,318

 
385,590

Property and equipment, net
58,516

 
51,330

Goodwill
194,052

 
194,052

Other intangible assets, net of accumulated amortization
56,072

 
67,207

Operating lease ROU asset
67,296

 
—

Other long-term assets
3,300

 
1,783

Total assets
$
791,554

 
$
699,962

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Current maturities of long-term debt
$
2,500

 
$
3,407

Trade accounts payable
83,174

 
87,407

Accrued wages and benefits
20,242

 
21,275

Customer advances
4,606

 
3,223

Billings in excess of costs and estimated profits
7,201

 
10,696

Short-term operating lease liability
17,711

 
—

Other current liabilities
16,544

 
17,269

Total current liabilities
151,978

 
143,277

Long-term debt, less unamortized debt issuance costs
235,576

 
236,979

Long-term operating lease liability
49,602

 
—

Other long-term liabilities
951

 
2,819

Deferred income taxes
11,056

 
8,633

Total long-term liabilities
297,185

 
248,431

Total Liabilities
449,163

 
391,708

Equity:
 
 
 
Total DXP Enterprises, Inc. equity
341,157

 
306,848

Non-controlling interest
1,234

 
1,406

Total Equity
342,391

 
308,254

Total liabilities and equity
$
791,554

 
$
699,962



Page 6
dxplogo.jpg
 
NEWS RELEASE
CONTACT: Kent Yee
Senior Vice President, CFO
www.dxpe.com
THE INDUSTRIAL DISTRIBUTION EXPERTS


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 September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Net cash provided by operating activities
$
10,943

 
$
16,825

 
$
7,483

 
$
9,842

Less: capital expenditures
(5,663
)
 
(2,189
)
 
(14,247
)
 
(7,705
)
 
 
 
 
 
 
 
 
Free cash flow
$
5,280

 
$
14,636

 
$
(6,764
)
 
$
2,137



Page 7