DXP 1Q Sales Increased 20.1%

Sales were $348.5 million for the first quarter of 2014, compared to $290.1 million for the first quarter of 2013, an increase of 20.1%. Organic sales increased 1.7%, acquisitions positively impacted sales by $53.4 million. Gross profit was $101.7 million, or 29.2% of sales, for the first quarter of 2014, compared to $89.1 million, or 30.7% of sales, for the first quarter of 2013.

 

Selling, general & administrative (SG&A) expenses were $79.5 million, or 22.8% of sales, for the first quarter of 2014, compared to $66.4 million, or 22.9% of sales, for the first quarter of 2013.

 

Operating income was $22.2 million for the current quarter, compared to $22.7 million for the first quarter of 2013. Operating profit as a percentage of sales was 6.4% and 7.8% in 2014 and 2013, respectively. Net income attributable to common shareholders of $11.6 million for the current quarter was down 12.2% compared to $13.2 million, for the first quarter of 2013.

 

Earnings per diluted share for the first quarter of 2014 were $0.75 per share, based on 15.6 million diluted shares, compared to $0.87 per share in the first quarter of 2013, based on 15.2 million diluted shares.

 

Free cash flow for the first quarter of 2014 was $19.0 million, or 164% of net income compared to $14.6 million, or 110% of net income for the first quarter of 2013.

David R. Little, Chairman and Chief Executive Officer remarked, “We have reviewed our first quarter results, and while we experienced 20% sales growth year over year, we are surprised by certain elements of DXP’s business and not satisfied with our overall performance. We are encouraged by the resilience and strength of our core DXP and believe we have some work ahead of us regarding some of our recent acquisitions. This quarter’s results highlight the continued tepid growth in the U.S. and the slight decline in Canada. During the first quarter, we experienced strong organic growth within Innovative Pumping Solutions, organic sales were essentially flat within our Service Centers, and we had a modest decline within Supply Chain Services. Today’s environment presents unique challenges around DXP’s growth model. We will invest where returns and business strategies make sense with a renewed eye on cost, efficiencies and business discipline. We continue to believe 2014 will provide DXP an excellent opportunity to further strengthen our position in the market, expand our customer relationships and continue to be customer driven experts.”

Mac McConnell, Chief Financial Officer added, "Our first quarter results were less than expected. However, I am pleased EBITDA increased 8.2% and we generated $19 million in free cash flow during the first quarter of 2014, an increase of 30% over the same period last year. As a result of our solid free cash flow generation, our leverage ratio was at 2.99:1, including the impact of our recent B27 acquisition. Subsequent to the quarter end, we completed the acquisition of Machinery Tooling & Supply, a leading distributor of cuttings tools, abrasives, coolants, machine shop and industrial & safety supplies. MT&S headquartered in Schaumburg, Illinois, is focused on serving customers in the oil & gas, general machining, automotive, power generation and industrial markets with approximately 52 employees. Sales and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization plus non-recurring items) for the twelve months ended March 31, 2014 were approximately $38.2 million and $2.5 million, respectively."

DXP Enterprises 2014 first quarter business segment results:

• Service Centers revenue was up 10% year over year with a 11% operating income margin. Organic revenue was up 0.1% year over year.
• Innovative Pumping Solutions revenue was up 92% year over year with a 12% operating income margin. Organic revenue was up 14% year over year.
• Supply Chain Services revenue was down 3% year over year with a 8% operating margin.