UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington,
D.C. 20549
Form
8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of
earliest event reported): August
7, 2018
Commission file number 0-21513
DXP
Enterprises, Inc.
(Exact name of registrant as
specified in its charter)
Texas |
76-0509661 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
7272 Pinemont, Houston, Texas 77040 |
(713) 996-4700 |
(Address of principal executive offices) | Registrant’s telephone number, including area code. |
_________________________
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ⃞
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ⃞
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following information is furnished pursuant to Regulation FD.
On August 7, 2018, DXP Enterprises, Inc., issued a press release announcing financial results for the second quarter ended June 30, 2018 and a conference call in connection therewith. A copy of the release is furnished herewith as Exhibit 99.1, and incorporated herein by reference. Such exhibit (i) is furnished pursuant to Item 2.02 of Form 8-K, (ii) is not to be considered "filed" under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and (iii) shall not be incorporated by reference into any previous or future filings made by or to be made by the Company with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits.
99.1 Press Release dated August 7, 2018 announcing the earnings results for the second quarter ended June 30, 2018.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
DXP ENTERPRISES, INC. |
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(Registrant) |
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By: |
/s/ Kent Yee |
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Kent Yee |
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Senior Vice President/Finance and Chief Financial Officer |
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By: |
/s/ Gene Padgett |
|
Gene Padgett |
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Senior Vice President/Chief Accounting Officer |
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|
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Dated: |
August 7, 2018 |
INDEX TO EXHIBITS
Introductory Note: The following exhibit is furnished pursuant to Item 2.02 of Form 8-K and is not to be considered “filed” under the Exchange Act and shall not be incorporated by reference into any of the Company’s previous or future filings under the Securities Act or the Exchange Act.
Exhibit No. |
Description |
Exhibit 99.1
DXP Enterprises Reports Second Quarter 2018 Results
HOUSTON--(BUSINESS WIRE)--August 7, 2018--DXP Enterprises, Inc. (NASDAQ: DXPE) today announced financial results for the second quarter ended June 30, 2018. The following are results for the three months and six months ended June 30, 2018, compared to the three months and six months ended June 30, 2017. A reconciliation of the non-GAAP financial measures can be found in the back of this press release.
Second Quarter 2018 financial highlights:
David R. Little, Chairman and CEO remarked, “We are pleased with our sequential sales growth from the first quarter and continual improvement in gross profit margins. This resulted in operating leverage that produced earnings per share of $0.61, after adjusting for one-time items. We continue to experience broad-based demand across our key end markets and regions. DXP’s second quarter 2018 sales were $311.2 million, or a 24.1 percent increase over the second quarter of 2017. Organic sales for the quarter, increased 19.2 percent and acquisitions added $12.4 million in sales. EBITDA grew 65.0 percent. During the second quarter of 2018, sales were $193.6 million for Service Centers, $74.2 million for Innovative Pumping Solutions and $43.4 million for Supply Chain Services. Business segment operating income increased 47.1 percent year-over-year and increased 33.8 percent sequentially. Our customers and suppliers look to DXP to provide a broad portfolio of products, value-added services and leading supply chain solutions. Overall, we are very pleased with the progress DXP is making. That said, we are optimistic that we can show continued sales and profit improvement during the second half of 2018.”
Kent Yee, CFO, added, “This is DXP’s sixth consecutive quarter of sequential sales increases. Additionally, we have experienced three quarters of sequential organic gross margin improvement. We announced the repricing of our Term Loan B on June 26th lowering interest by 75 basis points from LIBOR plus 5.50 percent to LIBOR plus 4.75 percent. Total debt outstanding as of June 30, 2018 was $250.4 million. DXP’s secured leverage ratio or net debt to EBITDA ratio was 3.2:1.0. We look forward to the momentum continuing and a positive fiscal year 2018.”
We will host a conference call regarding 2018 second quarter results on the Company’s website (www.dxpe.com) Tuesday, August 7, 2018 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.
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.
DXP ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ($ thousands, except per share amounts) |
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Three Months Ended
June 30, |
Six Months Ended
June 30, |
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2018 | 2017 | 2018 | 2017 | |||||||||||||||
Sales | $ | 311,227 | $ | 250,698 | $ | 597,163 | $ | 489,225 | ||||||||||
Cost of sales | 226,111 | 181,762 | 435,602 | 355,774 | ||||||||||||||
Gross profit | 85,116 | 68,936 | 161,561 | 133,451 | ||||||||||||||
Selling, general and administrative expenses | 65,056 | 58,679 | 130,352 | 114,958 | ||||||||||||||
Operating income | 20,060 | 10,257 | 31,209 | 18,493 | ||||||||||||||
Other (income) expense, net | (1,416 | ) | 57 | (1,438 | ) | (171 | ) | |||||||||||
Interest expense | 6,137 | 3,992 | 11,178 | 7,645 | ||||||||||||||
Income before income taxes | 15,339 | 6,208 | 21,469 | 11,019 | ||||||||||||||
Provision for income taxes | 3,776 | 2,239 | 5,412 | 4,056 | ||||||||||||||
Net income | 11,563 | 3,969 | 16,057 | 6,963 | ||||||||||||||
Less: Net income (loss) attributable to NCI* | 1 | (166 | ) | (56 | ) | (305 | ) | |||||||||||
Net income attributable to DXP Enterprises, Inc. | 11,562 | 4,135 | 16,113 | 7,268 | ||||||||||||||
Preferred stock dividend | 22 | 22 | 45 | 45 | ||||||||||||||
Net income attributable to common shareholders |
$ |
11,540 |
$ |
4,113 |
$ |
16,068 |
$ |
7,223 |
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Diluted earnings per share attributable to DXP Enterprises, Inc. | $ | 0.63 | $ | 0.23 | $ | 0.88 | $ | 0.40 | ||||||||||
Weighted average common shares and common equivalent shares outstanding |
18,398 |
18,244 |
18,378 |
18,246 |
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*NCI represents non-controlling interest | ||||||||||||||||||
Business segment financial highlights:
SEGMENT DATA ($ thousands, unaudited) |
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Three Months Ended
June 30, |
Six Months Ended
June 30, |
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Sales |
2018 |
2017 |
2018 |
2017 |
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Service Centers | $ | 193,576 | $ | 164,749 | $ | 368,937 | $ | 313,461 | ||||||||
Innovative Pumping Solutions | 74,257 | 44,470 | 141,899 | 93,528 | ||||||||||||
Supply Chain Services | 43,394 | 41,479 | 86,327 | 82,236 | ||||||||||||
Total DXP Sales | $ | 311,227 | $ | 250,698 | $ | 597,163 | $ | 489,225 | ||||||||
Three Months Ended
June 30, |
Six Months Ended
June 30, |
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Operating Income |
2018 |
2017 |
2018 |
2017 |
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Service Centers | $ | 21,933 | $ | 18,418 | $ | 37,762 | $ | 31,758 | ||||||||
Innovative Pumping Solutions | 8,956 | 1,754 | 15,338 | 5,264 | ||||||||||||
Supply Chain Services | 4,255 | 3,718 | 8,309 | 7,776 | ||||||||||||
Total operating income for segments | $ | 35,144 | $ | 23,890 | $ | 61,409 | $ | 44,798 |
Reconciliation of Operating Income for Reportable Segments ($ thousands, unaudited) |
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Three Months Ended
June 30, |
Six Months Ended
June 30, |
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2018 | 2017 | 2018 | 2017 | ||||||||||||||||
Operating income for reportable segments | $ | 35,144 | $ | 23,890 | $ | 61,409 | $ | 44,798 | |||||||||||
Adjustment for: | |||||||||||||||||||
Amortization of intangibles | 4,119 | 4,291 | 8,477 | 8,607 | |||||||||||||||
Corporate expenses | 10,965 | 9,342 | 21,723 | 17,698 | |||||||||||||||
Total operating income | 20,060 | 10,257 | 31,209 | 18,493 | |||||||||||||||
Interest expense | 6,137 | 3,992 | 11,178 | 7,645 | |||||||||||||||
Other (income) expense, net | (1,416 | ) | 57 | (1,438 | ) | (171 | ) | ||||||||||||
Income before income taxes | $ | 15,339 | $ | 6,208 | $ | 21,469 | $ | 11,019 |
Unaudited Reconciliation of Non-GAAP Financial Information |
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The following table is a reconciliation of Adjusted EBITDA**, a non-GAAP financial measure, to income before income taxes, calculated | |||||||||||||||||
and reported in accordance with U.S. GAAP ($ thousands, unaudited). | |||||||||||||||||
Three Months Ended
June 30, |
Six Months Ended
June 30, |
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2018 | 2017 | 2018 | 2017 | ||||||||||||||
Income before income taxes | $ | 15,339 | $ | 6,208 | $ | 21,469 | $ | 11,019 | |||||||||
Plus: interest expense | 6,137 | 3,992 | 11,178 | 7,645 | |||||||||||||
Plus: depreciation and amortization | 6,491 | 6,747 | 13,205 | 13,762 | |||||||||||||
EBITDA | $ | 27,967 | $ | 16,947 | $ | 45,852 | $ | 32,426 | |||||||||
Plus: NCI income (loss) before tax | 1 | 269 | (56 | ) | 493 | ||||||||||||
Plus: Stock compensation expense | 557 | 477 | 1,003 | 1,010 | |||||||||||||
Adjusted EBITDA | $ | 28,525 | $ | 17,693 | $ | 46,799 | $ | 33,929 |
DXP ENTERPRISES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS ($ thousands, except per share amounts) |
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As of
June 30, 2018 |
As of
December 31, 2017 |
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ASSETS | ||||||||||
Current assets: | ||||||||||
Cash | $ | 2,489 | $ | 22,047 | ||||||
Restricted Cash | 399 | 3,532 | ||||||||
Trade accounts receivable, net of allowances for doubtful accounts | 185,261 | 167,272 | ||||||||
Inventories | 110,767 | 91,413 | ||||||||
Costs and estimated profits in excess of billings | 37,943 | 26,915 | ||||||||
Prepaid expenses and other current assets | 4,750 | 5,296 | ||||||||
Federal income taxes receivable | 986 | 1,440 | ||||||||
Total current assets | 342,595 | 317,915 | ||||||||
Property and equipment, net | 53,035 | 53,337 | ||||||||
Goodwill | 194,033 | 187,591 | ||||||||
Other intangible assets, net of accumulated amortization | 75,682 | 78,525 | ||||||||
Other long-term assets | 1,587 | 1,715 | ||||||||
Total assets | $ | 666,932 | $ | 639,083 | ||||||
LIABILITIES AND EQUITY | ||||||||||
Current liabilities: | ||||||||||
Current maturities of long-term debt | $ | 3,394 | $ | 3,381 | ||||||
Trade accounts payable | 95,013 | 80,303 | ||||||||
Accrued wages and benefits | 18,106 | 18,483 | ||||||||
Customer advances | 7,882 | 2,189 | ||||||||
Billings in excess of costs and estimated profits | 3,075 | 4,249 | ||||||||
Other current liabilities | 5,645 | 16,220 | ||||||||
Total current liabilities | 133,115 | 124,825 | ||||||||
Long-term debt, less current maturities and unamortized debt issuance costs | 237,875 | 238,643 | ||||||||
Deferred income taxes | 7,966 | 7,069 | ||||||||
Other long-term liabilities | 2,611 | - | ||||||||
Total long-term liabilities | 248,452 | 245,712 | ||||||||
Total Liabilities | 381,567 | 370,537 | ||||||||
Equity: | ||||||||||
Total DXP Enterprises, Inc. equity | 284,854 | 267,979 | ||||||||
Non-controlling interest | 511 | 567 | ||||||||
Total Equity | 285,365 | 268,546 | ||||||||
Total liabilities and equity | $ | 666,932 | $ | 639,083 | ||||||
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 ($ thousands, unaudited).
Three Months Ended
June 30, |
Six Months Ended
June 30, |
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2018 | 2017 | 2018 | 2017 | |||||||||||||||
Net cash (used in) provided by operating activities | $ | (6,175 | ) | $ | 10,044 | $ | (6,983 | ) | $ | 7,854 | ||||||||
Less: purchase of equipment | 4,725 | 517 | 5,516 | 1,118 | ||||||||||||||
Free Cash Flow | $ | (10,900 | ) | $ | 9,527 | $ | (12,499 | ) | $ | 6,736 | ||||||||
Plus: Outstanding Checks | 21,714 | - | 21,714 | - | ||||||||||||||
Adjusted Free Cash Flow | $ | 10,814 | $ | 9,527 | $ | 9,215 | $ | 6,736 | ||||||||||
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***Outstanding Checks – Accounting rules require companies to net outstanding check balances against cash that is available. Prior to DXP’s Q3 2017 refinancing, DXP did not have cash on its balance sheet to net the outstanding checks, thus they were included in the accounts payable balance.
CONTACT:
DXP Enterprises, Inc.
Kent Yee, 713-996-4700
Senior
Vice President, CFO
www.dxpe.com