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): March
7, 2019
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 |
|
(Address of principal executive offices) |
_________________________
Registrant’s telephone number, including area code:
(713) 996-4700
_________________________
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 March 7, 2019, DXP Enterprises, Inc., issued a press release announcing financial results for the fourth quarter and fiscal year ended December 31, 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 March 7, 2019 announcing the earnings results for the fourth quarter and fiscal year ended December 31, 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. |
||
(Registrant) |
||
By: |
/s/ Kent Yee |
|
Kent Yee |
||
Senior Vice President/Finance and Chief Financial Officer |
Dated: March 7, 2019
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 Announces Fourth Quarter and Fiscal 2018 Results
HOUSTON--(BUSINESS WIRE)--March 7, 2019--DXP Enterprises, Inc. (NASDAQ:DXPE) today announced financial results for the fourth quarter and year ended December 31, 2018. The following are results for the three months and twelve months ended December 31, 2018, compared to the three months and twelve months ended December 31, 2017. A reconciliation of the non-GAAP financial measures can be found in the back of this press release.
Fourth Quarter 2018 financial highlights:
Fiscal Year 2018 financial highlights:
David R. Little, Chairman and CEO commented, “We are pleased with our fourth quarter results which wrapped up a tremendous fiscal 2018. In 2018, we returned to the sales growth we are accustomed to experiencing. This was driven through a combination of strong organic sales from our core, complemented by the acquisition of Application Specialties. This turned into 20.8 percent total sales growth with 16.1 percent organic growth. During the year, we delivered strong sales and EBITDA margin expansion, leading to significant earnings per share. We believe we continue to gain market share in many of our businesses driven by our focus on being fast, convenience, and technical experts for our customers. 'DXPeople you can trust.'
“DXP's fiscal 2018 total sales were $1.2 billion. Fiscal 2018 sales for Innovative Pumping Solutions grew 43.0 percent, Service Centers grew 17.0 percent and Supply Chain Services grew 8.0 percent. DXP produced total EBITDA of $95.8 million growing 55.2 percent over fiscal 2017.
“We continue to expect strong organic sales growth, EBITDA margin enhancement and strong cash flow generation. We are watching our key end markets closely, as the new normal seems to be periodic episodes of volatility as we experienced during the back of 2018. In fiscal 2019, we will build on the positive momentum generated in our business in 2018 and further the execution of our growth strategy, investments in our people and processes and maintain our cost discipline."
Kent Yee, CFO commented, “Fiscal 2018 financial performance reflects the execution of our financial goals and strategy. Total sales and EBITDA grew 20.8 percent and 55.2 percent, respectively. We delivered strong sales growth, operating margin expansion and thus operating leverage of 2.7x and notable free cash flow generation. Our fiscal 2018 diluted earnings per share was $1.94. We are pleased with the fourth quarter and year-end results. Our core business remains sound and continues to rebound and perform well. Our balance sheet is positioned to support the business over the long term. DXP ended the year with $40.3 million in cash on the balance sheet and net debt of $208.4 million. DXP's secured leverage ratio or net debt to EBITDA was 2.2:1.0. We have momentum going to fiscal 2019 and we expect to drive both organic and acquisition driven growth."
We will host a conference call regarding 2018 fourth quarter and year-ended results on the Company’s website (www.dxpe.com) Thursday, March 7, 2019 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 on-line archived replay will be available immediately after the conference call at www.dxpe.com.
Business Segment financial highlights:
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) | |||||||||||||||||||||
Three Months Ended |
Twelve Months Ended |
||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
Sales | $ | 311,006 | $ | 265,627 | $ | 1,216,197 | $ | 1,006,782 | |||||||||||||
Cost of sales | 224,429 | 194,460 | 883,989 | 735,201 | |||||||||||||||||
Gross profit | 86,577 | 71,167 | 332,208 | 271,581 | |||||||||||||||||
Selling, general and administrative expenses | 66,148 | 62,680 | 263,757 | 238,091 | |||||||||||||||||
Operating income | 20,429 | 8,487 | 68,451 | 33,490 | |||||||||||||||||
Other (income) expense, net | 126 | (132 | ) | (1,192 | ) | (456 | ) | ||||||||||||||
Interest expense | 4,978 | 4,481 | 20,937 | 17,054 | |||||||||||||||||
Income before income taxes | 15,325 | 4,138 | 48,706 | 16,892 | |||||||||||||||||
Provision for (benefit from) income taxes | 4,223 | (2,517 | ) | 13,185 | 363 | ||||||||||||||||
Net income | 11,102 | 6,655 | 35,521 | 16,529 | |||||||||||||||||
Net income (loss) attributable to NCI* | (20 | ) | 1 | (111 | ) | (359 | ) | ||||||||||||||
Net income attributable to DXP Enterprises, Inc. | 11,122 | 6,654 | 35,632 | 16,888 | |||||||||||||||||
Preferred stock dividend | 22 | 22 | 90 | 90 | |||||||||||||||||
Net income attributable to common shareholders | $ | 11,100 | $ | 6,632 | $ | 35,542 | $ | 16,798 | |||||||||||||
Diluted earnings per share attributable to DXP Enterprises, Inc. | $ | 0.60 | $ | 0.36 | $ | 1.94 | $ | 0.93 | |||||||||||||
Weighted average common shares and common equivalent shares outstanding | 18,410 | 18,232 | 18,393 | 18,240 | |||||||||||||||||
*NCI represents non-controlling interest | |||||||||||||||||||||
SEGMENT DATA | ||||||||||||||||||||
($ thousands, unaudited) | ||||||||||||||||||||
Three Months Ended |
Twelve Months Ended |
|||||||||||||||||||
Sales | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||
Service Centers | $ | 193,343 | $ | 166,951 | $ | 750,044 | $ | 641,275 | ||||||||||||
Innovative Pumping Solutions | 73,137 | 59,474 | 291,697 | 204,030 | ||||||||||||||||
Supply Chain Services | 44,526 | 39,201 | 174,456 | 161,477 | ||||||||||||||||
Total DXP Sales | $ | 311,006 | $ | 265,626 | $ | 1,216,197 | $ | 1,006,782 | ||||||||||||
Three Months Ended |
Twelve Months Ended |
|||||||||||||||||||
Operating Income | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||
Service Centers | $ | 22,366 | $ | 15,941 | $ | 80,718 | $ | 63,250 | ||||||||||||
Innovative Pumping Solutions | 9,833 | 4,321 | 33,943 | 11,423 | ||||||||||||||||
Supply Chain Services | 4,008 | 3,693 | 16,204 | 15,451 | ||||||||||||||||
Total Segment Operating Income | $ | 36,207 | $ | 23,955 | $ | 130,865 | $ | 90,124 | ||||||||||||
Reconciliation of Operating Income for Reportable Segments | |||||||||||||||||||||
($ thousands, unaudited) | |||||||||||||||||||||
Three Months Ended |
Twelve Months Ended |
||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
Operating income for reportable segments | $ | 36,207 | $ | 23,955 | $ | 130,865 | $ | 90,124 | |||||||||||||
Adjustment for: | |||||||||||||||||||||
Amortization of intangibles | 4,011 | 4,323 | 16,586 | 17,266 | |||||||||||||||||
Corporate expenses | 11,767 | 11,145 | 45,828 | 39,368 | |||||||||||||||||
Total operating income | $ | 20,429 | $ | 8,487 | $ | 68,451 | $ | 33,490 | |||||||||||||
Interest expense | 4,978 | 4,481 | 20,937 | 17,054 | |||||||||||||||||
Other expense (income), net | 126 | (132 | ) | (1,192 | ) | (456 | ) | ||||||||||||||
Income before income taxes | $ | 15,325 | $ | 4,138 | $ | 48,706 | $ | 16,892 | |||||||||||||
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 |
Twelve Months Ended |
|||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||
Income before income taxes | $ | 15,325 | $ | 4,138 | $ | 48,706 | $ | 16,892 | ||||||||||||
Plus: interest expense | 4,978 | 4,481 | 20,937 | 17,054 | ||||||||||||||||
Plus: depreciation and amortization | 6,454 | 7,188 | 26,164 | 27,786 | ||||||||||||||||
EBITDA | 26,757 | 15,807 | 95,807 | 61,732 | ||||||||||||||||
Plus: NCI loss(gain) before tax | 37 | (1 | ) | 157 | 577 | |||||||||||||||
Plus: Stock compensation expense | 526 | 316 | 2,549 | 1,708 | ||||||||||||||||
Adjusted EBITDA | 27,320 | 16,122 | 98,513 | 64,017 | ||||||||||||||||
DXP ENTERPRISES, INC. AND SUBSIDIARIES | ||||||||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||
($ thousands, except per share amounts) | ||||||||||
December 31, 2018 | December 31, 2017 | |||||||||
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash | $ | 40,304 | $ | 22,047 | ||||||
Restricted Cash | 215 | 3,532 | ||||||||
Accounts receivable | 191,829 | 167,272 | ||||||||
Inventories | 114,830 | 91,413 | ||||||||
Costs and estimated profits in excess of billings | 32,514 | 26,915 | ||||||||
Prepaid expenses and other current assets | 4,938 | 5,296 | ||||||||
Federal income taxes receivable | 960 | 1,440 | ||||||||
Total current assets | $ | 385,590 | $ | 317,915 | ||||||
Property and equipment, net | 51,330 | 53,337 | ||||||||
Goodwill | 194,052 | 187,591 | ||||||||
Other intangible assets | 67,207 | 78,525 | ||||||||
Other long-term assets | 1,783 | 1,715 | ||||||||
Total assets | $ | 699,962 | $ | 639,083 | ||||||
LIABILITIES AND EQUITY | ||||||||||
Current liabilities: | ||||||||||
Current maturities of long-term debt | $ | 3,407 | $ | 3,381 | ||||||
Trade accounts payable | 87,407 | 80,303 | ||||||||
Accrued wages and benefits | 21,275 | 18,483 | ||||||||
Customer advances | 3,223 | 2,189 | ||||||||
Billings in excess of costs and estimated profits | 10,696 | 4,249 | ||||||||
Other current liabilities | 17,269 | 16,220 | ||||||||
Total current liabilities | $ | 143,277 | $ | 124,825 | ||||||
Long-term debt, less unamortized debt issuance costs | 236,979 | 238,643 | ||||||||
Other long-term liabilities | 2,819 | — | ||||||||
Deferred income taxes | 8,633 | 7,069 | ||||||||
Total long-term liabilities | $ | 248,431 | $ | 245,712 | ||||||
Total Liabilities | $ | 391,708 | $ | 370,537 | ||||||
Equity: | ||||||||||
Total DXP Enterprises, Inc. equity | $ | 306,848 | $ | 267,979 | ||||||
Non-controlling interest | 1,406 | 567 | ||||||||
Total Equity | $ | 308,254 | $ | 268,546 | ||||||
Total liabilities and equity | $ | 699,962 | $ | 639,083 | ||||||
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 |
Twelve Months Ended |
|||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||
Net cash provided by operating activities | $ | 25,998 | $ | 4,017 | $ | 35,840 | $ | 12,544 | ||||||||||||
Less: purchase of equipment | 1,618 | 654 | 9,323 | 2,811 | ||||||||||||||||
Plus: proceeds from sales of assets | 12 | — | 2,558 | — | ||||||||||||||||
Free cash flow | $ | 24,392 | $ | 3,363 | $ | 29,075 | $ | 9,733 | ||||||||||||
CONTACT:
Kent Yee
713-996-4700
Senior Vice President, CFO
www.dxpe.com