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): November
5, 2015
Commission file number 0-21513
DXP Enterprises, Inc.
(Exact
name of registrant as specified in its charter)
Texas
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76-0509661
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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7272 Pinemont, Houston, Texas 77040
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(713) 996-4700
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(Address of principal executive offices)
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Registrant’s telephone number, including area code.
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_________________________
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))
ITEM 2.02. REGULATION FD DISCLOSURE
The following information is furnished pursuant to Regulation FD.
On November 5, DXP Enterprises, Inc., issued a press release announcing
financial results for the quarter ended September 30, 2015, a copy of
which is furnished as Exhibit 99.1 hereto, which is 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 November 5, 2015
SIGNATURE
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.
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DXP ENTERPRISES, INC.
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Date:
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November 5, 2015
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By:
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/s/ Mac McConnell
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Mac McConnell
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Senior Vice President and Chief Financial Officer
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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.
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Description
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99.1
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Press Release dated November 5, 2015 regarding financial results
for the quarter ended September 30, 2015
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Exhibit 99.1
DXP
Enterprises Announces 2015 Third Quarter Results
-
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
HOUSTON--(BUSINESS WIRE)--November 5, 2015--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.
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DXP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($ thousands, except per share amounts)
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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2015
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2014
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2015
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2014
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|
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Sales
|
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$
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303,080
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$
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387,053
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$
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968,362
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$
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1,117,160
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Cost of sales
|
|
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217,374
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|
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273,644
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693,308
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790,998
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Gross profit
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85,706
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113,409
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275,054
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326,162
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Selling, general and administrative expenses
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75,082
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|
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82,611
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232,336
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246,818
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Impairment expense
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58,888
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-
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58,888
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B27 settlement
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7,348
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-
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7,348
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Operating income (loss)
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(55,612
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)
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30,798
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(23,518
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)
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79,344
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Other expense (income), net
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327
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|
10
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|
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(67
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)
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|
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1
|
Interest expense
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2,630
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3,295
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|
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7,905
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|
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|
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9,868
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Income (loss) before income taxes
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|
|
|
(58,569
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)
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27,493
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(31,356
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)
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|
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69,475
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Provision for income taxes
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|
|
|
(5,885
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)
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|
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10,504
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4,510
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|
|
|
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26,639
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Net income (loss)
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|
|
|
(52,684
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)
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16,989
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(35,866
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)
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|
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42,836
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Less: Net income (loss) attributable to non-controlling interest
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(249
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)
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-
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(249
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)
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-
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Net income (loss) attributable to DXP Enterprises, Inc.
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(52,435
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)
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16,989
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(35,617
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)
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42,836
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Preferred stock dividend
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23
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23
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68
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68
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Net income (loss) attributable to common shareholders
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$
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(52,458
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)
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|
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$
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16,966
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|
$
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(35,685
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)
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|
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$
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42,768
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Diluted earnings (loss) per share attributable to DXP Enterprises,
Inc.
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$
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(3.64
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)
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$
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1.10
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|
$
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(2.48
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)
|
|
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$
|
2.76
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Weighted average common shares and common equivalent shares
outstanding
|
|
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14,422
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|
|
|
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15,496
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|
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14,394
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|
|
|
|
15,536
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|
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SEGMENT DATA
($ thousands)
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Three Months ended September 30,
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Nine Months ended September 30,
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Service
Centers
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IPS
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SCS
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Total
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Service
Centers
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IPS
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SCS
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Total
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2015
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Sales
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$
|
199,306
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$
|
61,458
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|
$
|
42,316
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|
$
|
303,080
|
|
|
$
|
639,212
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|
$
|
202,627
|
|
$
|
126,523
|
|
$
|
968,362
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Operating income for reportable segments
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|
|
|
$
|
17,957
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|
$
|
6,139
|
|
$
|
3,821
|
|
$
|
27,917
|
|
|
$
|
61,943
|
|
$
|
20,667
|
|
$
|
10,835
|
|
$
|
93,455
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|
|
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|
|
|
|
|
|
|
|
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|
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|
|
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|
2014
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|
|
|
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|
|
|
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Sales
|
|
|
|
$
|
255,041
|
|
$
|
88,614
|
|
$
|
43,398
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|
$
|
387,053
|
|
|
$
|
735,104
|
|
$
|
259,070
|
|
$
|
122,986
|
|
$
|
1,117,160
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Operating income for reportable segments
|
|
|
|
$
|
29,444
|
|
$
|
14,979
|
|
$
|
3,721
|
|
$
|
48,144
|
|
|
$
|
79,356
|
|
$
|
40,328
|
|
$
|
10,424
|
|
$
|
130,108
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|
|
|
|
|
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|
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Reconciliation of Operating Income for Reportable Segments
($ thousands)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Three Months Ended
September 30,
|
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Nine Months Ended
September 30,
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|
|
|
|
|
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, calculated and
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
|
CONTACT:
DXP Enterprises, Inc.
Mac McConnell, 713-996-4700
Senior
Vice President, Finance & CFO
www.dxpe.com
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