DXP Enterprises, Inc. Acquisition of

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Transcription:

DXP Enterprises, Inc. Acquisition of Presented by: David Little Chairman, President & CEO Mac McConnell Senior Vice President & CFO Kent Yee Senior Vice President of Corporate Development NASDAQ: DXPE DECEMBER 2013

FORWARD LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of the U. S. federal securities laws that involve risks and uncertainties. Certain statements contained in this report are not purely historical, including statements regarding our expectations, beliefs, intentions or strategies regarding the future that are forward-looking. These statements include statements concerning projected revenues, expenses, gross profit, income, gross margins or other financial items. All forward-looking statements speak only as of the date of this presentation. You should not place undue reliance on these forward-looking statements. Although we believe our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this presentation are reasonable, we may be unable to achieve these plans, intentions or expectations. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. Risks and uncertainties that could cause actual results to differ from those in the forward-looking statements are described in Risk Factors and Forward-Looking Statements in our Quarterly Reports on Form 10-Q and in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission. Statement Regarding use of Non-GAAP Measures: The Non-GAAP financial measures contained in this presentation (including, without limitation, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin,, Return on Invested Capital (ROIC) and variations thereof) are not measures of financial performance calculated in accordance with GAAP and should not be considered as alternatives to net income (loss) or any other performance measure derived in accordance with GAAP or as alternatives to cash flows from operating activities as a measure of our liquidity. They should be viewed in addition to, and not as a substitute for, analysis of our results reported in accordance with GAAP, or as alternative measures of liquidity. Management believes that certain non-gaap financial measures provide a view to measures similar to those used in evaluating our compliance with certain financial covenants under our credit facilities and provide financial statement users meaningful comparisons between current and prior year period results. They are also used as a metric to determine certain components of performance-based compensation. The adjustments and Adjusted EBITDA are based on currently available information and certain adjustments that we believe are reasonable and are presented as an aid in understanding our operating results. They are not necessarily indicative of future results of operations that may be obtained by the Company. 2

DXP S GROWTH STRATEGY Organic growth remains a top priority.... SuperCenters Sales force expansion New markets and geographies Product line expansion... Acquisitions accelerate growth and scale Opportunities to enlarge key DXP product divisions All acquisitions leverage DXP s scale and expertise U.S. remains top priority - - significant holes in the map Combined, DXP consistently grows in excess of the market Consistent top-and bottom-line growth One-stop source for customers technical products and service needs - - customer driven experts in MROP solutions Long-term shareholder value creation 3

B27 TRANSACTION SUMMARY DXP Enterprises, Inc. announced purchase of B27 on December 9, 2013 Signed definitive agreement on December 9, 2013 Subject to expiration or termination of waiting period under Hart-Scott-Rodino Antitrust Improvements Act ( HSR ) and other customary closing conditions Transaction expected to close in first quarter of 2014 B27 is a leading global supplier of sophisticated pump and integrated flow control solutions serving the oil & gas, power generation, air quality and other industrial markets Projected FY2013 Sales and adjusted EBITDA of $198 million and $35 million, respectively Purchase of stock and units for approximately $285 million or 8.1x 2013E EBITDA Financed with borrowings under a new $600 million amended and restated credit facility and DXP stock Forward purchase multiple in-line with other large DXP transactions supported by size, margins, growth rate and return profile Key members of management staying onboard Accretive to earnings for fiscal 2014 Between $0.50 $0.55 per share Does not factor in any revenue synergies 4

STRATEGIC RATIONALE: COMPLEMENTARY ACQUISITION B27 provides: Portfolio of complementary products and services - overlaps with existing DXP products and services Management expertise in engineered pumps and integrated flow solutions deepens DXP s bench strength Global customer base - 16% of 2012 shipments were international, access to key growing global markets DXP Enterprise provides: North American sales force and presence within rotating equipment - opportunity to better serve customers Expanded sourcing capabilities - ability to provide purchasing and operating scale and leverage Leading North American pump platform - proven leader in servicing and providing pump products and services Combined: Enhanced portfolio of complementary rotating equipment products & services End-market and customer expansion - - power and air quality as well as access to key international markets Positioned to address long-term global customer demands 5

B27 OVERVIEW $142M Sales (FY 2012) Complementary with New Offerings BRANDS IFS DISTRIBUTION MARKET POSITIONING Superior Customer Service - Outstanding Lead Times Differentiated Business Model ~15% EBITDA Margins API PUMPS Leading Engineering Capabilities Geographical Mix (% of 2012 Shipments) Middle East 4% Canada 9% Asia 2% Mexico/ S. America 1% All Others 1% SUMMARY Leading suite of highly engineered pumps and integrated flow solutions Headquartered in Houston, TX with approximately 342 employees servicing customers through seven facilities in the U.S., a JV in Nigeria and a sales office in Dubai One-stop source for full range of pump and flow control solutions GROWTH DRIVERS Recent investments in capacity and capabilities positioning B27 to meet market demands Supply and demand dynamics in oil & gas driving need for infrastructure investments US 83% Substantial advantages in lead times prevent competitors from replicating offering 6

Systems Pumps Aftermarket 7 COMPLEMENTARY PRODUCT AND SERVICE OFFERING OFFERING OVERLAP w/dxp DESCRIPTION Integrated Flow Solutions Provides customers with single-source solution for modular system needs, integrating electrical controls and mechanical equipment Pump Distribution Provides customers with full line of pumps from 8 OEMs, from centrifugal to positive displacement, meeting nearly all application needs of the customer Remanufactured Pumps Provides customers with remanufactured API pumps Remanufactured delivery times typically at 12-16 weeks vs 30+ weeks for newly manufactured pumps Branded Pump Manufacturing Full product line: Single-stage, Multi-stage, Vertical inline, Vertical turbine Service, Repair, Parts, and Other Manage customer needs, providing high-value aftermarket support on either an as-needed basis or under long-term contracts 33,000 sq ft. Repair Center & Global Service Team

HIGHLY EXPERIENCED, PROVEN MANAGEMENT TEAM Experienced management team with a strong record of building a profitable business Average executive tenure is over 25+ years Instrumental in B27 s growth and vision for further expansion Management is committed to remaining with the business and executing on continued growth Meaningful bench strength across B27 Highly specialized and motivated sales force Over 38 sales and sales engineering professionals Sales agents operating abroad in over 10 countries 8

STRONG REVENUE GROWTH AND MARGINS Revenue Growth at 11.5% CAGR $175.0 $150.0 $125.0 $100.0 $75.0 $50.0 $25.0 $141.9 Sales $M Gross Margin 50.0% $91.7 $94.3 40.0% $80.0 $83.9 32.5% 30.3% 28.5% 30.2% 26.2% 60.0% 30.0% 20.0% Growing Presence and Exposure to Key International Markets US / Canada 92% International 8% $0.0 Adj EBITDA 2008 2009 2010 2011 2012 Margin: 15.6% 15.8% 18.4% 16.8% 17.7% 10.0% GROWING MOMENTUM WITH TOP TIER GLOBAL CUSTOMER BASE: Source: Audited financial statements, DXP and B27 management estimates 9

DXP AND B27 COMBINATION - - ENHANCED REVENUE MIX FY 2012 PROFORMA GEOGRAPHY (1) 5% SEGMENTS (1) 15% GEOGRAPHY LEGEND U.S. DXP ($1,097M SALES) 14% Canada 95% 71% Rest of World (ROW) 8% 4% 14% B27 ($142M SALES) 88% 86% SEGMENT LEGEND Service Center (SC) 4% 6% 23% Supply Chain Solutions (SCS) COMBINED ($1,239M SALES) 13% Innovative Pumping Solutions (IPS) 90% 64% (1) FYE December 31, 2012. B27 Geography is based on 2012 actual shipments, while Combined (DXP + B27) is based upon B27 geographic shipments and DXP geographic sales. 10

B27 MEETS DXP S FINANCIAL CRITERIA FY 2012 Target DXP B27 Organic Revenue Growth 10% 12% 50% EBITDA Percentage (1) 10%+ 10% 18% Return on Invested Capital (2) 25%+ 34% 28% (1) B27 reflects Adjusted EBITDA for costs that will no longer exist post acquisition (2) ROIC is defined as tax affected 2012 LTM EBITDA / average total net operating assets. 11

DXP ACQUISITION SCORECARD ACQUISITION PRIORITY Consistent with DXP Vision and Strategy ACQUISITION SUMMARY Supports desire to become one-stop source for customer rotating equipment needs. Global portfolio of products and services. Complements DXP s business segments and key product divisions B27 significantly overlaps with DXP s existing business. Enhances and enlarges DXP s Innovative Pumping Solutions while complementing DXP s Service Center segment. Returns in excess of DXP s cost of capital and margins higher than DXP B27 s Gross and EBITDA margins are higher than DXP s Accretive in first full year post acquisition Expected to be accretive by approximately $0.50 - $0.55 per diluted share in fiscal year 2014 12

GO FORWARD PLAN DXP and B27 plan on the combined business leveraging purchasing scale, best practices, market knowledge and product / service offering DXP will help B27 accelerate expansion plans No immediate changes to B27 leadership or team members anticipated Will maintain B27 name and brands Will primarily report under DXP s Innovative Pumping Solutions business 13