- Fiscal 2017 sales of $1.0 billion, up
7.2 percent from fiscal 2016 (excluding Vertex)
- Solid full year GAAP diluted EPS of
$0.93
- $61.7 million in earnings before
interest, taxes, depreciation and amortization (“EBITDA”)
- Free cash flow (“FCF”) of $9.7 million,
adjusting for the reclassification of outstanding checks, FCF for
fiscal 2017 was $26.8 million
- Closed on new $85 million Asset Based
Revolving Credit Facility and $250 million Senior Secured Term Loan
B
- Net debt of $226.5 million with $25.6
million in cash on the balance sheet
DXP Enterprises, Inc. (NASDAQ: DXPE) today announced
financial results for the fourth quarter ended December 31, 2017.
The following are results for the three and twelve months ended
December 31, 2017, compared to the three and twelve months ended
December 31, 2016. A reconciliation of the non-GAAP financial
measures can be found in the back of this press release.
Fourth Quarter 2017 financial highlights:
- Sales were $265.6 million for the
fourth quarter of 2017, an increase of 5.4 percent from the third
quarter and an increase of 19.5 percent compared to $222.3 million
for the fourth quarter of 2016.
- Earnings per diluted share for the
fourth quarter was $0.36 based upon 18.2 million diluted shares,
compared to $0.42 per share in the fourth quarter of 2016, based on
17.4 million diluted shares, which included the $5.6 million gain
on the sale of Vertex.
- Earnings before interest, taxes,
depreciation and amortization (EBITDA) for the fourth quarter was
$15.8 million compared to $13.5 million for the third quarter of
2017, an increase of 17.1 percent. EBITDA as a percentage of sales
was 6.0 percent and 5.4 percent for the fourth and third quarter,
respectively, a 59 basis point improvement.
- Free cash flow (cash flow from
operating activities less capital expenditures) for the fourth
quarter was $3.4 million or 21.3 percent of EBITDA.
Fiscal Year 2017 financial highlights:
- Sales were $1.0 billion for fiscal year
2017, compared to $962.1 million for fiscal year 2016, an increase
of 4.6 percent. Adjusting for the divestiture of Vertex in October
of 2016 or $22.7 million in sales, organic sales increased 7.2
percent.
- Gross profit was $271.6 million, or
27.0 percent of sales for the fiscal year 2017, compared to $264.8
million, or 27.5 percent of sales for the fiscal year 2016.
- Selling, general and administrative
(SG&A) expenses were $238.1 million, or 23.7 percent of sales
for fiscal 2017, compared to $245.5 million, or 25.5 percent of
sales for fiscal 2016.
- Earnings per diluted share for the
fiscal year 2017 grew 89.8 percent to $0.93 based upon 18.2 million
diluted shares, compared to $0.49 per diluted share in fiscal 2016,
based on 15.9 million diluted shares.
- EBITDA was $61.7 million for fiscal
2017, compared to $55.2 million for fiscal 2016. EBITDA as a
percentage of sales was 6.1 percent and 5.7 percent in fiscal 2017
and 2016, respectively.
- Free cash flow (cash flow from
operating activities less capital expenditures) for fiscal 2017 was
$9.7 million compared to $43.1 million for fiscal 2016. Adjusting
for the 2017 reclassification of outstanding checks (see non-GAAP
reconciliation), free cash flow for fiscal 2017 would have been
$26.8 million.
Business segment financial highlights:
- Service
Centers’ revenue for the fiscal year was $641.3 million, an
increase of 3.3 percent year-over-year with a 9.9 percent operating
income margin.
- For the fourth quarter, revenue
increased 3.8 percent sequentially with a 9.6 percent operating
income margin.
- Innovative
Pumping Solutions’ revenue for the fiscal year was $204.0
million, an increase of 9.0 percent year-over-year with a 5.6
percent operating income margin.
- For the fourth quarter, revenue
increased 16.6 percent sequentially with a 7.3 percent operating
income margin.
- Supply Chain
Services’ revenue for the fiscal year was $161.5 million, an
increase of 4.9 percent year-over-year with a 9.6 percent operating
margin.
- For the fourth quarter, revenue
declined 2.1 percent sequentially with a 9.4 percent operating
income margin.
David R. Little, Chairman and CEO remarked, “We closed the year
with fourth-quarter sales growing 5.4 percent sequentially leading
to full year results growing 7.2 percent year-over-year, adjusting
for the divestiture of Vertex. Improved market conditions together
with DXP’s ability to execute on key organic initiatives are
delivering widespread improvements across DXP.
I am encouraged with the current state of our company and I have
never been more confident in our strategy and ability to create
shareholder and stakeholder value. We are prioritizing investments
and focusing on DXP having a smart recovery through this next up
cycle. We are also emphasizing continuous improvement across DXP to
generate margin expansion while growing the top-line.
DXP’s fiscal 2017 sales were $1.0 billion, or a 4.6 percent
increase over fiscal 2016, on a reported actual basis. Each of our
business segments experienced sales growth in fiscal 2017 with
Innovative Pumping Solutions growing 9.0 percent, Supply Chain
Services growing 4.9 percent and Service Centers growing 3.3
percent. Fiscal 2017 sales were $641.3 million for Service Centers,
$204.0 million for Innovative Pumping Solutions and $161.5 million
for Supply Chain Services. DXP produced EBITDA of $61.7 million
growing 11.8 percent over fiscal 2016.
As we look ahead, we expect accelerating organic sales growth,
EBITDA margin enhancement, with strong cash flow generation and
growth in earnings. Our key end markets continue to show
stabilization but we will watch all our markets closely, especially
given our recent experience of both oil and gas and industrial
cycling down at the same time. In 2018, we will build on the
momentum we have generated and remain customer-focused as we
continue to create long-term value for shareholders.”
Kent Yee, CFO added, “DXP’s fiscal 2017 financial performance
reflects the beginning of a positive improvement in our business.
Adjusting for the divestiture of Vertex, sales and EBITDA grew 7.2
percent and 32.2 percent, respectively. Our fiscal 2017 diluted
earnings per share was $0.93, which also includes a $1.3 million
provisional benefit related to U.S. tax reform. DXP ended the year
with $25.6 million in cash on the balance sheet and net debt of
$226.5 million. During the year, we successfully refinanced our
credit facility with a new ABL and Term Loan B, while positioning
DXP to take advantage of what we believe is building momentum in
our business. DXP is in a position to invest in our business and
see potential for significant value creation as we pivot our
strategy to growth and continuous improvement to expand margins.
DXP’s execution from our sales teams and partners is driving growth
across our businesses and we look forward to a successful fiscal
2018.”
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 CONSOLIDATED STATEMENTS OF
OPERATIONS
($ thousands, except per share
amounts)
Years Ended
Three Months Ended
December 31, December 31, 2017
2016 2017 2016 Sales $
1,006,782 $ 962,092 $ 265,627 $ 222,291 Cost of sales
735,201 697,290 194,460 161,730 Gross profit
271,581 264,802 71,167 60,561 Selling, general and administrative
expenses 238,091 245,470 62,680 53,009
Operating income 33,490 19,332 8,487 7,552 Other income, net (456)
(5,906) (132) (5,509) Interest expense 17,054 15,564
4,481 3,866 Income before income taxes 16,892 9,674
4,138 9,195 Provision (benefit) for income taxes 363
2,523 (2,517) 2,064 Net income 16,529 7,151 6,655
7,131 Less: Net (loss) income attributable to non-controlling
interest (359) (551) 1 (250) Net income
attributable to DXP Enterprises, Inc. 16,888 7,702 6,654 7,381
Preferred stock dividend 90 90 22 22
Net income attributable to common shareholders
$
16,798
$
7,612
$
6,632
$
7,359
Diluted earnings per share attributable to DXP Enterprises, Inc. $
0.93 $ 0.49 $ 0.36 $ 0.42
Weighted average common shares and common
equivalent shares outstanding
18,240
15,882
18,232
17,411
SEGMENT DATA
($ thousands, unaudited)
Sales by Segment Years Ended
Three Months Ended December 31, December 31,
2017
2016
2017
2016
Service Centers $
641,275
$ 621,007 $
166,951
$ 139,655 Innovative Pumping Solutions
204,030
187,124
59,474
45,510 Supply Chain Services 161,477 153,961
39,201 37,126
Total DXP
$
1,006,782
$ 962,092 $
265,626
$ 222,291
Operating Income by Segment
Years Ended Three Months Ended
December 31, December 31,
2017
2016
2017
2016
Service Centers $
63,250
$ 47,633 $
15,941
$ 12,155 Innovative Pumping Solutions
11,423
9,867
4,321
2,444 Supply Chain Services 15,450 15,449
3,693 3,838
Total DXP
$
90,123
$ 72,949 $
23,955
$ 18,437
Reconciliation of Operating Income for Reportable Segments
($ thousands, unaudited)
Years Ended
Three Months Ended
December 31,
December 31,
2017 2016
2017 2016 Operating income for
reportable segments $
90,123
$ 72,949 $
23,955
$ 18,437 Adjustment for: Amortization of intangibles
17,265
18,061
4,323
4,504 Corporate expense 39,368 35,556 11,145
6,381 Total operating income 33,490 19,332 8,487 7,552
Interest expense 17,054 15,564 4,481 3,866 Other income, net
(456) (5,906) (132) (5,509)
Income before
income taxes $
16,892
$ 9,674 $ 4,138 $ 9,195
Unaudited Reconciliation of Non-GAAP
Financial Information
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).
Years Ended Three Months
Ended December 31, December 31, 2017
2016 2017 2016
Income before income taxes $ 16,892 $ 9,674 $ 4,138 $ 9,195
Plus: interest expense
17,054 15,564 4,481 3,866 Plus: depreciation and amortization
27,786 29,994 7,188 7,367
EBITDA
$ 61,732 $ 55,232 $
15,807 $ 20,428 Plus: NCI loss (income)
before tax 577 886 (1) 400 Plus: Stock compensation expense 1,708
3,580 316 1,636
Adjusted EBITDA
$ 64,017 $ 59,698 $
16,122 $ 22,464 **EBITDA
– earnings before impairments, interest, taxes, depreciation and
amortization
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).
Years Ended Three Months
Ended December 31, December 31, 2017
2016 2017 2016
Net cash provided by operating activities $ 12,545 $ 48,006
$ 4,017 $ 12,866 Less: purchase of equipment 2,811 4,868 654 1,977
Free Cash Flow
$ 9,734 $ 43,138 $ 3,363
$ 10,889 Plus: Outstanding Checks 17,054 -
4,354 -
Adjusted Free Cash Flow
$ 26,788 $ 43,138 $ 7,717
$ 10,889 ***Outstanding Checks –
Accounting rules require companies to net outstanding check
balances against cash that is available. Prior to DXP’s Q3
refinancing, DXP did not have cash on its balance sheet with its
primary lender to net the outstanding checks, thus they were
included in the accounts payable balance.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180320006658/en/
DXP Enterprises, Inc.Kent Yee, 713-996-4700Senior Vice
President, CFOwww.dxpe.com
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