- Sales of $303 million for the quarter,
down 6 percent sequentially and 22 percent year-over-year
- Free cash flow for the quarter of $16
million. Excluding one-time cash outflows, free cash flow for the
quarter was $30.5 million
- Recorded $67.2 million in one-time,
impairment or special charges related to B27 and the ITT Goulds’
separation
- On October 29, DXP officially launched
a complete rotating equipment supply chain solution to better serve
existing and new customers
- Completed acquisition of Cortech
Engineering
DXP Enterprises, Inc. (NASDAQ: DXPE) announces financial
results for its third quarter ended September 30, 2015. The
following are results for the three months and nine months ended
September 30, 2015 compared to the three months and nine months
ended September 30, 2014. A reconciliation of the non-GAAP
financial measures is in the back of this press release.
DXP Enterprises 2015 Third Quarter Financial
Highlights:
- Sales were $303.1 million for the third
quarter of 2015, a decrease of 6.4 percent from the second quarter
and a decrease of 21.7 percent compared to $387.1 million for the
third quarter of 2014. Organic sales decreased 6.7 percent
sequentially and 22.3 percent from 2014. Acquisitions positively
impacted sales by $2.2 million.
- Gross profit was $85.7 million, or 28.3
percent of sales for the third quarter of 2015, compared to $113.4
million, or 29.3 percent of sales for the third quarter of
2014.
- Selling, general & administrative
(SG&A) expenses were $75.1 million, or 24.8 percent of sales
for the third quarter of 2015, compared to $82.6 million, or 21.3
percent of sales for the third quarter of 2014.
- Adjusted EBITDA for the third quarter
of 2015 was $20.0 million, versus $22.5 million for the second
quarter of 2015 and $39.8 million for the third quarter of 2014.
Adjusted EBITDA as a percentage of sales was 6.6 percent versus 6.9
percent for the second quarter of 2015 and 10.3 percent in 2014,
respectively. EBITDA was $11.7 million for the current quarter.
Adjusted EBITDA includes a one-time $7.3 million working capital
dispute settlement and $1.0 million in above normal legal
fees.
- Loss per diluted share for the third
quarter was $3.64. Excluding non-cash impairment charges of $58.9
million and the one-time $7.3 million working capital dispute
settlement, earnings per diluted share were $0.32 per share,
assuming a 40.0 percent tax rate and based upon 15.3 million
diluted shares.
- Free cash flow (cash flow from
operating activities less capital expenditures) for the third
quarter of 2015 was $16.0 million, compared to $39.7 million for
the third quarter of 2014. Excluding $11.3 million paid in
connection with the working capital dispute settlement with the
sellers of B27, $1.0 million of legal fees related to disputes with
ITT Goulds and the sellers of B27 and $2.2 million of capital
expenditures in excess of a normalized $3.0 million level of
capital expenditures, free cash flow would have been $30.5 million
for the quarter.
David R. Little, Chairman and CEO remarked, “DXP continues to
perform in the midst of the cyclical downturn and ahead of similar
peers with like exposure. DXP’s business segments performed well in
the midst of a challenging market. Total DXP’s sales declined 6
percent sequentially and 22 percent year-over-year. Continuing to
outperform the 20 percent sequential and 56.6 percent decline
year-over-year for the North American rig count. During the third
quarter we continued to experience uphill sales challenges across
our major end markets including upstream drilling, development and
completion; upstream production; and mining markets. That being
said, we remain focused on managing costs, improving performance
and investing for the eventual upturn. We continue to appreciate
all the hard work from our DXPeople. During the third quarter, we
experienced sequential sales declines across each of our business
segments with Innovative Pumping Solutions® declining 8 percent,
Service Centers 7 percent and Supply Chain Services declining 0.8
percent. During the third quarter, we also experienced a 115 basis
point and 27 basis point, sequential improvement in operating
income margin, respectively, for Innovative Pumping Solutions and
Supply Chain Services. We are excited by these improvements and
will continue to look for opportunities across each of our segments
and corporate to manage costs. DXP also produced an adjusted EBITDA
of $20.0 million and free cash flow of over $30.5 million excluding
certain items. We are pleased with our ability to generate cash and
manage our resources effectively.”
“Additionally, we recently announced transformative actions,
including the separation from ITT Goulds. We are excited to move
forward for our customers' and employees' benefit. This resolution
increases our flexibility to grow profitably as we continue to
focus on meeting customer needs, delivering strong performance and
sustainable economic value for our customers, employees and
shareholders. Our longer-range outlook was strongly enhanced with
our announcement of a complete supply chain solution within
rotating equipment. We continue to focus on controllable execution
that services our customers, maintains our differentiation and
creates sustainable shareholder value. While we expect the
near-term to continue to be challenging, our outlook for the long
term is very positive based on our proven track record of
navigating through similar cycles and positioning DXP for the
future,” Little concluded.
Mac McConnell, CFO added, "DXP generated $16.0 million in free
cash flow for the quarter and $63.3 million year-to-date. During
the quarter, DXP paid down debt by $1.0 million while also paying
$10.5 million for the acquisition of Cortech, $11.3 million in
connection with the working capital dispute with the sellers of
B27, $4.7 million for capital expenditures related to our new pump
offering and $1.0 million of legal fees related to disputes with
ITT Goulds and the sellers of B27. As such, we continue to produce
strong free cash flow even after investing for growth and managing
one-time costs. Our third quarter EBITDA for bank purposes was
$20.2 million. Our bank leverage ratio was 3.58:1 as of the end of
the third quarter."
We will host a conference call regarding 2015 third quarter
results on the Company’s website (www.dxpe.com) today at 5 p.m.
EST. 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 and at www.viavid.net.
One-Time Payments
During the third quarter of 2015, DXP incurred a total of $12.3
million of one-time payments associated with the final working
capital dispute resolution associated with the B27 transaction and
legal fees associated with ITT Goulds and the sellers of B27. The
$11.3 million final working capital dispute payment was the result
of an accounting arbitration process whereby an accounting expert
reviewed DXP’s and the sellers' claim based upon a disagreement
surrounding the closing working capital target. This was a one-time
payment and will have no impact on DXP’s business and bank credit
agreement. The $1.0 million in legal fees associated with the final
working capital dispute and ITT Goulds represent costs above normal
recurring legal costs.
Impairments
As a result of the sustained decline in crude oil prices,
reduced capital spending by customers and reduced revenue
expectations, DXP performed an interim impairment test and
recognized preliminary impairment expense of $57.8 million of the
goodwill associated with the acquisition of B27 during the third
quarter of 2015. DXP also recorded a $1.1 million impairment charge
to write-off intangible assets related to the Goulds’ vendor
relationship.
DXP Enterprises 2015 Third Quarter Business Segment
Results:
- Service
Centers’ revenue for the third quarter declined 21.9 percent
year-over-year with a 9.0 percent operating income margin. Organic
revenue declined 22.7 percent year-over-year.
- For the nine months, revenue declined
13.0 percent with a 9.7 percent operating income margin.
- Innovative
Pumping Solutions’ revenue for the third quarter declined
30.7 percent year-over-year with a 10.0 percent operating income
margin. Innovative Pumping Solutions experienced a strong
sequential improvement in operating income margins with a 115 basis
point improvement.
- For the nine months, revenue declined
21.8 percent with a 10.2 percent operating income margin.
- Supply Chain
Services’ revenue for the third quarter declined 2.5 percent
year-over-year with a 9.0 percent operating margin or 46 basis
points improvement over 2014. Supply Chain Services continues to
show strong operating income margins with a 27 basis point
sequential improvement.
- For the nine months, revenue was up 2.9
percent with a 8.6 percent operating income margin
Non-GAAP Financial Measures
DXP supplements reporting of net income (loss) with non-GAAP
measurements, including adjusted EBITDA, EBITDA and free cash flow.
This supplemental information should not be considered in isolation
or as a substitute for the GAAP measurements. Additional
information regarding EBITDA referred to in this press release is
included below under "--Reconciliation of Non-GAAP Measures."
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. For more information, review the Company’s filings with
the Securities and Exchange Commission.
DXP
ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
($ thousands, except per share
amounts)
Three
Months Ended
September 30,
Nine Months Ended
September 30,
2015 2014 2015 2014 Sales $
303,080 $ 387,053 $ 968,362 $ 1,117,160 Cost of sales
217,374 273,644 693,308 790,998
Gross profit 85,706 113,409 275,054 326,162 Selling, general and
administrative expenses 75,082 82,611 232,336 246,818 Impairment
expense 58,888 - 58,888 B27 settlement 7,348 -
7,348 Operating income (loss) (55,612 ) 30,798
(23,518 ) 79,344 Other expense (income), net 327 10 (67 ) 1
Interest expense 2,630 3,295 7,905
9,868 Income (loss) before income taxes (58,569 )
27,493 (31,356 ) 69,475 Provision for income taxes (5,885 )
10,504 4,510 26,639 Net income (loss)
(52,684 ) 16,989 (35,866 ) 42,836 Less: Net income (loss)
attributable to non-controlling interest (249 ) -
(249 ) - Net income (loss) attributable to DXP
Enterprises, Inc. (52,435 ) 16,989 (35,617 ) 42,836 Preferred stock
dividend 23 23 68 68 Net
income (loss) attributable to common shareholders
$
(52,458
)
$
16,966
$
(35,685
)
$
42,768
Diluted earnings (loss) per share attributable to DXP Enterprises,
Inc. $ (3.64 ) $ 1.10 $ (2.48 ) $ 2.76
Weighted average common shares and common
equivalent shares outstanding
14,422
15,496
14,394
15,536
SEGMENT DATA
($ thousands)
Three Months ended September
30, Nine Months ended September 30,
Service
Centers
IPS SCS
Total
Service
Centers
IPS SCS
Total
2015 Sales $ 199,306 $ 61,458 $ 42,316 $ 303,080 $ 639,212 $
202,627 $ 126,523 $ 968,362
Operating income forreportable
segments
$ 17,957 $ 6,139 $ 3,821 $ 27,917 $ 61,943 $ 20,667 $ 10,835 $
93,455
2014 Sales $ 255,041 $ 88,614 $ 43,398 $
387,053 $ 735,104 $ 259,070 $ 122,986 $ 1,117,160
Operating income forreportable
segments
$ 29,444 $ 14,979 $ 3,721 $ 48,144 $ 79,356 $ 40,328 $ 10,424 $
130,108
Reconciliation of Operating Income for
Reportable Segments
($ thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2015
2014
2015
2014
Operating income for reportable segments $ 27,917 $ 48,144 $ 93,455
$ 130,108 Adjustment for: B27 Settlement 7,348 - 7,348 - Impairment
58,888 - 58,888 - Amortization of intangibles 5,240 5,658 15,907
16,895 Corporate expense 12,053
11,688
34,830
33,869
Total operating income (loss) (55,612 ) 30,798 (23,518 ) 79,344
Interest expense 2,630 3,295 7,905 9,868 Other expense (income),
net 327 10 (67 ) 1 Income (loss)
before income taxes $ (58,569 ) $ 27,493 $ (31,356 ) $ 69,475
Unaudited Reconciliation of Non-GAAP
Financial Information
The following table is a reconciliation of
EBITDA**, a non-GAAP financial measure, to income before income
taxes, calculatedand reported in accordance with U.S. GAAP ($
thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2015 2014 2015 2014
Income (loss) before income taxes $ (58,569 ) $ 27,493 $
(31,356 ) $ 69,475 Impairment expense 58,888 - 58,888 - Plus:
interest expense 2,630 3,295 7,905 9,868 Plus: depreciation and
amortization 8,329 9,000 24,915 26,314 Non-controlling interest,
before tax 380 - 380 -
EBITDA $ 11,658 $ 39,788
$ 60,732 $ 105,657 B27
Settlement 7,348 - 7,348 - Legal fees 1,000 -
1,000 -
Adjusted EBITDA $
20,006 $ 39,788 $ 69,080
$ 105,657
**EBITDA – earnings before impairments,
interest, taxes, depreciation and amortization
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151105006863/en/
DXP Enterprises, Inc.Mac McConnell, 713-996-4700Senior Vice
President, Finance & CFOwww.dxpe.com
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