COVER
COVER | 9 Months Ended |
Sep. 30, 2023 shares | |
Cover [Abstract] | |
Document Type | 10-Q |
Document Quarterly Report | true |
Document Period End Date | Sep. 30, 2023 |
Document Transition Report | false |
Entity File Number | 0-21513 |
Entity Registrant Name | DXP Enterprises, Inc. |
Entity Incorporation, State or Country Code | TX |
Entity Tax Identification Number | 76-0509661 |
Entity Address, Address Line One | 5301 Hollister |
Entity Address, City or Town | Houston |
Entity Address, State or Province | TX |
Entity Address, Postal Zip Code | 77040 |
City Area Code | 713 |
Local Phone Number | 996-4700 |
Title of 12(b) Security | Common Stock par value $0.01 |
Trading Symbol | DXPE |
Security Exchange Name | NASDAQ |
Entity Current Reporting Status | Yes |
Entity Interactive Data Current | Yes |
Entity Filer Category | Accelerated Filer |
Entity Small Business | false |
Entity Emerging Growth Company | false |
Entity Shell Company | false |
Entity Common Stock, Shares Outstanding | 16,176,412 |
Entity Central Index Key | 0001020710 |
Current Fiscal Year End Date | --12-31 |
Document Fiscal Year Focus | 2023 |
Document Fiscal Period Focus | Q3 |
Amendment Flag | false |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Income Statement and Statement of Comprehensive Income [Abstract] | ||||
Sales | $ 419,249 | $ 387,314 | $ 1,271,556 | $ 1,074,537 |
Cost of sales | 293,687 | 275,681 | 889,101 | 763,758 |
Gross profit | 125,562 | 111,633 | 382,455 | 310,779 |
Selling, general and administrative expenses | 89,706 | 85,094 | 273,720 | 236,761 |
Income from operations | 35,856 | 26,539 | 108,735 | 74,018 |
Other expense (income), net | 1,234 | 1,565 | 522 | 2,941 |
Interest expense | 12,684 | 6,833 | 36,068 | 17,610 |
Income before income taxes | 21,938 | 18,141 | 72,145 | 53,467 |
Provision for income tax expense | 5,766 | 5,097 | 19,339 | 13,402 |
Net income | 16,172 | 13,044 | 52,806 | 40,065 |
Net loss attributable to noncontrolling interest | 0 | (885) | 0 | (938) |
Net income attributable to DXP Enterprises, Inc. | 16,172 | 13,929 | 52,806 | 41,003 |
Preferred stock dividend | 22 | 22 | 67 | 67 |
Net income attributable to common shareholders | 16,150 | 13,907 | 52,739 | 40,936 |
Net income | 16,172 | 13,044 | 52,806 | 40,065 |
Foreign currency translation adjustments | (844) | (1,156) | (87) | (3,078) |
Comprehensive income | $ 15,328 | $ 11,888 | $ 52,719 | $ 36,987 |
Earnings per share (Note 9): | ||||
Basic (in dollars per share) | $ 0.98 | $ 0.74 | $ 3.08 | $ 2.19 |
Diluted (in dollars per share) | $ 0.93 | $ 0.71 | $ 2.94 | $ 2.10 |
Weighted average common shares outstanding: | ||||
Basic (in shares) | 16,516 | 18,820 | 17,104 | 18,712 |
Diluted (in shares) | 17,356 | 19,660 | 17,944 | 19,552 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Current assets: | ||
Cash | $ 27,176 | $ 46,026 |
Restricted cash | 91 | 91 |
Accounts receivable, net of allowance of $4,088 and $7,610, respectively | 320,972 | 320,880 |
Inventories | 105,145 | 101,392 |
Costs and estimated profits in excess of billings | 47,211 | 23,588 |
Prepaid expenses and other current assets | 15,799 | 21,644 |
Income taxes receivable | 393 | 2,493 |
Total current assets | 516,787 | 516,114 |
Property and equipment, net | 56,277 | 45,964 |
Goodwill | 342,122 | 333,759 |
Other intangible assets, net | 67,913 | 79,585 |
Operating lease right of use assets, net | 48,462 | 57,402 |
Other long-term assets | 13,543 | 4,456 |
Total assets | 1,045,104 | 1,037,280 |
Current liabilities: | ||
Current maturities of debt | 4,369 | 4,369 |
Trade accounts payable | 101,439 | 100,784 |
Accrued wages and benefits | 35,540 | 26,260 |
Customer advances | 12,595 | 20,128 |
Billings in excess of costs and estimated profits | 7,181 | 10,411 |
Short-term operating lease liabilities | 15,459 | 18,083 |
Other current liabilities | 45,275 | 32,866 |
Total current liabilities | 221,858 | 212,901 |
Long-term debt, net of unamortized debt issuance costs | 408,105 | 409,205 |
Long-term operating lease liabilities | 34,028 | 40,189 |
Other long-term liabilities | 15,469 | 4,701 |
Deferred income taxes liability | 2,068 | 4,892 |
Total long-term liabilities | 459,670 | 458,987 |
Total liabilities | 681,528 | 671,888 |
Commitments and contingencies (Note 10) | ||
Shareholders' equity: | ||
Series A and B preferred stock, $1.00 par value each; 1,000,000 shares authorized each | 16 | 16 |
Common stock, $0.01 par value, 100,000,000 shares authorized; 16,176,787 and 17,690,069 outstanding, respectively | 345 | 345 |
Additional paid-in capital | 215,684 | 213,937 |
Retained earnings | 303,288 | 250,549 |
Accumulated other comprehensive loss | (31,762) | (31,675) |
Treasury stock, at cost 4,141,989 and 2,435,352 shares, respectively | (123,995) | (67,780) |
Total DXP Enterprises, Inc. equity | 363,576 | 365,392 |
Total liabilities and equity | $ 1,045,104 | $ 1,037,280 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Allowance for accounts receivable | $ 4,088 | $ 7,610 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares outstanding (in shares) | 16,176,787 | 17,690,069 |
Treasury stock, at cost (shares) | 2,435,352 | |
Series A preferred stock | ||
Preferred stock, par value (in dollars per share) | $ 1 | $ 1 |
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Series B preferred stock | ||
Preferred stock, par value (in dollars per share) | $ 1 | $ 1 |
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 52,806 | $ 40,065 |
Reconciliation of net income to net cash provided by operating activities: | ||
Depreciation | 6,262 | 7,367 |
Amortization of intangibles and fixed assets | 15,206 | 13,958 |
Provision for (recovery of) credit losses | (277) | 834 |
Payment of contingent consideration liability in excess of acquisition-date fair value | (160) | (781) |
Fair value adjustment on contingent consideration | 1,502 | 2,125 |
Amortization of debt issuance costs | 2,176 | 1,357 |
Restricted stock compensation expense | 2,211 | 1,368 |
Deferred income taxes | (10,178) | (3,009) |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | 2,295 | (59,563) |
Costs and estimated profits in excess of billings | (23,629) | (12,988) |
Accounts payable and accrued expenses | 12,868 | 40,936 |
Prepaid expenses and other assets | 16,583 | 2,341 |
Inventories | (3,397) | (27,858) |
Billings in excess of costs and estimated profits | (3,232) | 721 |
Other long-term liabilities | (7,261) | (4,617) |
Net cash provided by operating activities | 63,775 | 2,256 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (7,103) | (3,426) |
Acquisition of businesses, net of cash acquired | (8,848) | (48,506) |
Net cash used in investing activities | (15,951) | (51,932) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Borrowings on asset-backed credit facility | 7,870 | 577,999 |
Repayments on asset-backed credit facility | (7,870) | (537,393) |
Repayments under term loan facility | (3,276) | (2,475) |
Debt issuance costs | 0 | (540) |
Payment for acquisition contingent consideration liability | (5,090) | (469) |
Preferred stock dividends paid | (67) | (67) |
Shares repurchased held in treasury | (56,215) | (18,470) |
Payment for employee taxes withheld from stock awards | (464) | (292) |
Principal payments on finance leases | (1,632) | 0 |
Net cash (used in) provided by financing activities | (66,744) | 18,293 |
Effect of foreign currency on cash | 70 | (634) |
Net change in cash and restricted cash | (18,850) | (32,017) |
Cash and restricted cash at beginning of period | 46,117 | 49,080 |
Cash and restricted cash at end of period | $ 27,267 | $ 17,063 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Thousands | Total | Preferred stock Series A preferred stock | Preferred stock Series B preferred stock | Common stock | Paid-in capital | Retained earnings | Treasury stock | Non controlling interest | Accum other comp loss |
Beginning Balance at Dec. 31, 2021 | $ 346,727 | $ 1 | $ 15 | $ 195 | $ 206,772 | $ 202,484 | $ (33,511) | $ 53 | $ (29,282) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Preferred dividends paid | (23) | (23) | |||||||
Restricted stock compensation expense | 370 | 370 | |||||||
Tax related items for share based awards | (159) | (159) | |||||||
Issuance of shares of common stock | 527 | 527 | |||||||
Currency translation adjustment | 1,669 | 1,669 | |||||||
Purchase of treasury stock | (1,513) | (1,513) | |||||||
Net income | 12,529 | 12,642 | (113) | ||||||
Ending Balance at Mar. 31, 2022 | 360,127 | 1 | 15 | 195 | 207,510 | 215,103 | (35,024) | (60) | (27,613) |
Beginning Balance at Dec. 31, 2021 | 346,727 | 1 | 15 | 195 | 206,772 | 202,484 | (33,511) | 53 | (29,282) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Issuance of shares of common stock | 5,757 | ||||||||
Net income | 40,065 | ||||||||
Ending Balance at Sep. 30, 2022 | 385,612 | 1 | 15 | 345 | 213,455 | 243,420 | (38,379) | (885) | (32,360) |
Beginning Balance at Mar. 31, 2022 | 360,127 | 1 | 15 | 195 | 207,510 | 215,103 | (35,024) | (60) | (27,613) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Preferred dividends paid | (22) | (22) | |||||||
Restricted stock compensation expense | 493 | 493 | |||||||
Tax related items for share based awards | (131) | (131) | |||||||
Issuance of shares of common stock | 4,217 | 2 | 4,215 | ||||||
Currency translation adjustment | (3,591) | (3,591) | |||||||
Net income | 14,493 | 14,433 | 60 | ||||||
Ending Balance at Jun. 30, 2022 | 375,586 | 1 | 15 | 197 | 212,087 | 229,514 | (35,024) | 0 | (31,204) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Preferred dividends paid | (22) | (22) | |||||||
Restricted stock compensation expense | 505 | 505 | |||||||
Tax related items for share based awards | (2) | (2) | |||||||
Issuance of shares of common stock | 1,013 | 148 | 865 | ||||||
Currency translation adjustment | (1,156) | (1,156) | |||||||
Purchase of treasury stock | (3,355) | (3,355) | |||||||
Net income | 13,044 | 13,928 | (885) | ||||||
Net income (loss) | 13,043 | ||||||||
Ending Balance at Sep. 30, 2022 | 385,612 | 1 | 15 | 345 | 213,455 | 243,420 | (38,379) | (885) | (32,360) |
Beginning Balance at Dec. 31, 2022 | 365,392 | 1 | 15 | 345 | 213,937 | 250,549 | (67,780) | 0 | (31,675) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Preferred dividends paid | (23) | (23) | |||||||
Restricted stock compensation expense | 476 | 476 | |||||||
Tax related items for share based awards | (104) | (104) | |||||||
Currency translation adjustment | 98 | 98 | |||||||
Purchase of treasury stock | (9,135) | (9,135) | |||||||
Net income | 17,580 | 17,580 | |||||||
Ending Balance at Mar. 31, 2023 | 374,284 | 1 | 15 | 345 | 214,309 | 268,106 | (76,915) | 0 | (31,577) |
Beginning Balance at Dec. 31, 2022 | 365,392 | 1 | 15 | 345 | 213,937 | 250,549 | (67,780) | 0 | (31,675) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Issuance of shares of common stock | 0 | ||||||||
Net income | 52,806 | ||||||||
Ending Balance at Sep. 30, 2023 | 363,576 | 1 | 15 | 345 | 215,684 | 303,288 | (123,995) | 0 | (31,762) |
Beginning Balance at Mar. 31, 2023 | 374,284 | 1 | 15 | 345 | 214,309 | 268,106 | (76,915) | 0 | (31,577) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Preferred dividends paid | (22) | (22) | |||||||
Restricted stock compensation expense | 871 | 871 | |||||||
Tax related items for share based awards | (328) | (328) | |||||||
Currency translation adjustment | 659 | 659 | |||||||
Purchase of treasury stock | (25,053) | (25,053) | |||||||
Net income | 19,054 | 19,054 | |||||||
Ending Balance at Jun. 30, 2023 | 369,465 | 1 | 15 | 345 | 214,852 | 287,138 | (101,968) | 0 | (30,918) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Preferred dividends paid | (22) | (22) | |||||||
Restricted stock compensation expense | 864 | 864 | |||||||
Tax related items for share based awards | (32) | (32) | |||||||
Currency translation adjustment | (844) | (844) | |||||||
Purchase of treasury stock | (22,027) | (22,027) | |||||||
Net income | 16,172 | 16,172 | |||||||
Ending Balance at Sep. 30, 2023 | $ 363,576 | $ 1 | $ 15 | $ 345 | $ 215,684 | $ 303,288 | $ (123,995) | $ 0 | $ (31,762) |
THE COMPANY
THE COMPANY | 9 Months Ended |
Sep. 30, 2023 | |
THE COMPANY [Abstract] | |
THE COMPANY | THE COMPANY DXP Enterprises, Inc. together with its subsidiaries (collectively "DXP," the "Company," "us," "we," or "our") was incorporated in Texas on July 26, 1996. DXP Enterprises, Inc. and its subsidiaries are engaged in the business of distributing maintenance, repair and operating ("MRO") products and services to a variety of end markets and business-to-business customers. Additionally, DXP provides integrated, custom pump skid packages, pump remanufacturing and manufactures branded private label pumps to energy and broad industrial customers. The Company is currently organized into three business segments: Service Centers ("SC"), Innovative Pumping Solutions ("IPS"), and Supply Chain Services ("SCS"). See Note 11 - Segment Reporting for discussion of the business segments. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES | 9 Months Ended |
Sep. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES Basis of Presentation The Company's financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). For interim financial reporting not all disclosures normally required in annual consolidated financial statements prepared in accordance with U.S. GAAP are required. The unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2022 that are included in our annual report on Form 10-K filed with the SEC on April 17, 2023 (“Annual Report”). The results of operations for the nine months ended September 30, 2023 are not necessarily indicative of results expected for the full fiscal year. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary for the fair statement of the Company's financial position, results of operations and cash flows for the interim periods presented. The ownership interest of noncontrolling investors of the Company's subsidiaries are recorded as noncontrolling interest. All inter-company accounts and transactions have been eliminated in consolidation. During the fourth quarter of 2022, the Company became aware of a financing cash flow error related to borrowings and repayments on our asset-backed credit facility as a result of the Company inadvertently duplicating journal entries, resulting in the overstatement of financing cash flow activities from borrowings and repayments related to our revolving credit facility. Management's assessment concluded that the errors were not material, individually or in the aggregate, to any prior period unaudited condensed consolidated financial statements. The Company concluded to revise prior period unaudited condensed consolidated financial statements the next time they were reported. The unaudited condensed consolidated financial statements included herein, have been revised to correct for the impact of these errors. The revision for the unaudited condensed consolidated statement of cash flows for the nine months ended September 30, 2022, is provided in the following table ( in thousands ): As Previously Reported Adjustments Revised Proceeds from asset-backed credit facility $ 605,257 $ (27,258) $ 577,999 Payments on asset-backed credit facility (564,651) 27,258 (537,393) |
RECENTLY ISSUED ACCOUNTING PRON
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Sep. 30, 2023 | |
Accounting Policies [Abstract] | |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS The Company has implemented all new accounting pronouncements that are in effect and is evaluating any new accounting pronouncements that may impact its financial statements, including the new Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers standard. The Company does not believe the new accounting pronouncement will have a material impact on its financial position or results of operations for recent acquisitions. Accounting Pronouncements Not Yet Adopted All other new accounting pronouncements that have been issued, but not yet effective, are currently being evaluated and at this time are not expected to have a material impact on our financial position or results of operations. |
FAIR VALUE OF FINANCIAL ASSETS
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES | 9 Months Ended |
Sep. 30, 2023 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES | FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES Our acquisitions may include contingent consideration as part of the purchase price. The fair value of the contingent consideration is estimated as of the acquisition date based on the present value of the contingent payments to be made using a weighted probability of possible payments. The unobservable inputs used in the determination of the fair value of the contingent consideration include management's assumptions about the likelihood of payment based on the established benchmarks, discount rates, and an internal rate of return analysis. The fair value measurement includes inputs that are Level 3 inputs as they are not observable in the market. Should actual results increase or decrease as compared to the assumptions used in our analysis, the fair value of the contingent consideration obligations will increase or decrease, up to the contracted limit, as applicable. Changes in the fair value of the contingent consideration are measured each reporting period and reflected in our results of operations. As of September 30, 2023, we recorded liabilities in other current and long-term liabilities for contingent consideration associated with the acquisitions of Drydon Equipment, Inc. ("Drydon"), Cisco Air Systems, Inc. ("Cisco"), Sullivan Environmental Technologies, Inc. ("Sullivan"), Florida Valve & Equipment, LLC and Environmental MD, Inc. (collectively,“Florida Valve EMD”) and Riordan Materials Corporation (“Riordan”) of $1.8 million, $2.4 million, $1.6 million, $0.3 million, and $2.8 million, respectively. The following table provides a reconciliation of the beginning and ending balances and gains or losses recognized during the nine months ended September 30, 2023 ( in thousands ): Contingent Consideration *Beginning balance at December 31, 2022 $ 10,166 Acquisitions and settlements: Acquisitions ( Note 12 ) 2,498 Settlements (5,250) Total remeasurement adjustments: Changes in fair value recorded in other (income) expense, net 1,502 *Ending Balance at September 30, 2023 $ 8,916 *Amounts included in other current liabilities were $5.2 million and $5.5 million for the periods ending September 30, 2023 and December 31, 2022, respectively. Amounts included in long-term liabilities were $3.7 million and $4.7 million for the periods ending September 30, 2023 and December 31, 2022, respectively. Sensitivity to Changes in Significant Unobservable Inputs The significant Level 3 unobservable inputs used in the fair value measurement of contingent consideration related to the acquisitions of Drydon, Cisco, Sullivan, Florida Valve EMD, and Riordan are annualized EBITDA forecasts developed by the Company's management and the probability of achievement of those EBITDA results. The discount rate used in the calculations was 11.1 percent. Changes in our unobservable inputs in isolation would result in a change to our fair value measurement. The maximum amount of contingent consideration payable under these arrangements is $10.4 million. Other financial instruments not measured at fair value on the Company's unaudited condensed consolidated balance sheets at September 30, 2023 and December 31, 2022, but which require disclosure of their fair values include: cash, restricted cash, accounts receivable, trade accounts payable and accrued expenses. The Company believes that the estimated fair value of such instruments at September 30, 2023 and December 31, 2022 approximates their carrying value as reported on the unaudited condensed consolidated balance sheets due to the relative short maturity of these instruments. See Note 8 - Long-term Debt for fair value disclosures on our asset-backed line of credit and term loan debt under our syndicated credit agreement facilities. |
INVENTORIES
INVENTORIES | 9 Months Ended |
Sep. 30, 2023 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | INVENTORIES The carrying values of inventories are as follows ( in thousands ): September 30, 2023 December 31, 2022 Finished goods $ 77,539 $ 82,906 Work in process 27,606 18,486 Inventories $ 105,145 $ 101,392 |
CONTRACT ASSETS AND LIABILITIES
CONTRACT ASSETS AND LIABILITIES | 9 Months Ended |
Sep. 30, 2023 | |
Contractors [Abstract] | |
CONTRACT ASSETS AND LIABILITIES | CONTRACT ASSETS AND LIABILITIES Under our customized pump production and water and wastewater project contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, upon various measures of performance, including achievement of certain milestones, completion of specified units, or completion of a contract. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets presented as "Costs and estimated profits in excess of billings". However, we sometimes receive advances or deposits from our customers before revenue is recognized, resulting in contract liabilities that are presented as “Billings in excess of costs and estimated profits” on our unaudited condensed consolidated balance sheets. Costs and estimated profits on uncompleted contracts and related amounts billed were as follows ( in thousands ): September 30, 2023 December 31, 2022 Costs incurred on uncompleted contracts $ 96,903 $ 70,329 Estimated profits, thereon 34,852 23,274 Total costs and estimated profits on uncompleted contracts 131,755 93,603 Less: billings to date 91,717 80,421 Net $ 40,038 $ 13,182 Such amounts were included in the accompanying unaudited condensed consolidated balance sheets for September 30, 2023 and December 31, 2022 under the following captions ( in thousands ): September 30, 2023 December 31, 2022 Costs and estimated profits in excess of billings $ 47,211 $ 23,588 Billings in excess of costs and estimated profits (7,181) (10,411) Translation adjustment 8 5 Net $ 40,038 $ 13,182 During the nine months ended September 30, 2023, $10.0 million of the balances that were previously classified as contract liabilities at the beginning of the period were recognized in revenues. Contract asset and liability changes were primarily due to normal activity and timing differences between our performance and customer payments. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2023 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES Income tax expense during interim periods is based on our estimated annual effective income tax rate plus any discrete items, which are recorded in the period in which they occur. Our effective tax rate from continuing operations was a tax expense of 26.3 percent for the three months ended September 30, 2023 compared to a tax expense of 28.1 percent for the three months ended September 30, 2022. Compared to the U.S. statutory rate for the three months ended September 30, 2023, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions recorded for research and development tax credits and was partially offset by research and development tax credits and other tax credits. Our effective tax rate from continuing operations was a tax expense of 26.8 percent for the nine months ended September 30, 2023 compared to a tax expense of 25.1 percent for the nine months ended September 30, 2022. Compared to the U.S. statutory rate for the nine months ended September 30, 2023, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions recorded for research and development tax credits and was partially offset by research and development tax credits and other tax credits. Compared to the U.S. statutory rate for the nine months ended September 30, 2022, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses and uncertain tax positions for research and development tax credits and was partially offset by research and development tax credits and other tax credits. To the extent penalties and interest would be assessed on any underpayment of income tax, such accrued amounts would be classified as a component of income tax provision (benefit) in the financial statements consistent with the Company’s policy. |
LONG-TERM DEBT
LONG-TERM DEBT | 9 Months Ended |
Sep. 30, 2023 | |
Debt Disclosure [Abstract] | |
LONG-TERM DEBT | LONG-TERM DEBT The components of the Company's long-term debt consisted of the following ( in thousands ): September 30, 2023 December 31, 2022 Carrying Value (1) Fair Value Carrying Value (1) Fair Value ABL Revolver $ — $ — $ — $ — Term Loan B 424,857 424,857 428,133 411,008 Total debt 424,857 424,857 428,133 411,008 Less: current portion (4,369) (4,369) (4,369) (4,194) Long-term debt less current maturities $ 420,488 $ 420,488 $ 423,764 $ 406,814 (1) Carrying value amounts do not include unamortized debt issuance costs of $12.4 million and $14.6 million for September 30, 2023 and December 31, 2022, respectively. Credit Agreements On July 19, 2022, the Company entered into an Amended and Restated Loan and Security Agreement (the “ABL Credit Agreement”) that provided for a $135.0 million asset-backed revolving line of credit (the "ABL Revolver"). The ABL Credit Agreement amends and restates the Loan and Security Agreement dated as of August 29, 2017. Subject to the conditions set forth in the ABL Credit Agreement, the ABL Revolver may be increased by up to an aggregate of $50.0 million, in minimum increments of $10.0 million. The ABL Revolver matures on July 19, 2027. As of September 30, 2023, the Company had no borrowings outstanding under the ABL Revolver, and total borrowing capacity under the ABL Revolver was $131.9 million, net of the letters of credit outstanding of $3.1 million. On November 22, 2022, the Company entered into an amendment to its existing $330 million Senior Secured Term Loan (the "Term Loan Amendment"), borrowing an additional $105 million that was added to the existing $330 million Senior Secured Term Loan (the “Term Loan Agreement”). As of September 30, 2023 there was $424.9 million outstanding under the Term Loan Agreement. The Term Loan Amendment amends and supplements the Term Loan Agreement, dated as of December 23, 2020, and provides for among other things, $105.0 million in new incremental commitments. The Term Loan Agreement and Term Loan Amendment amortize in equal quarterly installments of 0.25 percent with the balance payable in December 2027 when the facility matures. Subject to securing additional lender commitments, the Term Loan Agreement allows for incremental increases in facility size up to an aggregate of $85.0 million, plus an additional amount such that the Company's Secured Leverage Ratio (as defined in the Term Loan Agreement) would not exceed 3.75 to 1.00. Interest accrues on the Term Loan at a rate equal to SOFR plus a margin of 5.25 percent for the SOFR Loans (as defined in the Term Loan Amendment). We are required to repay the Term Loan with certain asset sales and insurance proceeds, certain debt proceeds and 50 percent of excess cash flow--reducing to (i.) 25 percent if our total leverage ratio is no more than 3.00 to 1.00 and (ii.) zero percent if our total leverage ratio is no more than 2.50 to 1.00. The Company was in compliance with all financial covenants under the ABL Credit Agreement and Term Loan Agreements as of September 30, 2023. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2023 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | EARNINGS PER SHAREBasic earnings per share is computed based on weighted average shares outstanding and excludes dilutive securities. Diluted earnings per share is computed including the impacts of all potentially dilutive securities. The following table sets forth the computation of basic and diluted earnings per share for the periods indicated ( in thousands, except per share data ): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Basic earnings per share: Weighted average shares outstanding 16,516 18,820 17,104 18,712 Net income attributable to DXP Enterprises, Inc. $ 16,172 $ 13,929 $ 52,806 $ 41,003 Convertible preferred stock dividend 22 22 67 67 Net income attributable to common shareholders $ 16,150 $ 13,907 $ 52,739 $ 40,936 Per share amount $ 0.98 $ 0.74 $ 3.08 $ 2.19 Diluted earnings per share: Weighted average shares outstanding 16,516 18,820 17,104 18,712 Assumed conversion of convertible preferred stock 840 840 840 840 Total dilutive shares 17,356 19,660 17,944 19,552 Net income attributable to common shareholders $ 16,150 $ 13,907 $ 52,739 $ 40,936 Convertible preferred stock dividend 22 22 67 67 Net income attributable to DXP Enterprises, Inc. $ 16,172 $ 13,929 $ 52,806 $ 41,003 Per share amount $ 0.93 $ 0.71 $ 2.94 $ 2.10 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIESFrom time to time, the Company is a party to various legal proceedings arising in the ordinary course of business. While DXP is unable to predict the outcome or estimate the financial impact of these disputes, it believes that the ultimate resolution will not have, either individually or in the aggregate, a material adverse effect on DXP's consolidated financial position, cash flows, or results of operations. |
SEGMENT REPORTING
SEGMENT REPORTING | 9 Months Ended |
Sep. 30, 2023 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING | SEGMENT REPORTING The Company's reportable business segments are: Service Centers, Innovative Pumping Solutions and Supply Chain Services. The Service Centers segment is engaged in providing MRO products, equipment and integrated services, including logistics capabilities, to business-to-business customers. The Service Centers segment provides a wide range of MRO products in the rotating equipment, bearing, power transmission, hose, fluid power, metal working, industrial supply, safety products and safety services categories. The Innovative Pumping Solutions segment fabricates and assembles custom-made pump packages, re-manufactures pumps, manufactures branded private label pumps and provides products and process lines for the water and wastewater treatment industries. The Supply Chain Services segment provides a wide range of MRO products and manages all or part of a customer's supply chain, including warehouse and inventory management. Sales are shown net of inter-segment eliminations. The following table sets out financial information related to the Company's segments excluding amortization ( in thousands ): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Sales Service Centers $ 294,458 $ 260,083 $ 888,116 $ 729,977 Innovative Pumping Solutions 58,963 59,044 184,402 169,890 Supply Chain Services 65,828 68,187 199,038 174,670 Total Sales $ 419,249 $ 387,314 $ 1,271,556 $ 1,074,537 Operating Income Service Centers $ 41,441 $ 35,718 $ 130,274 $ 95,437 Innovative Pumping Solutions 11,155 7,327 31,638 23,122 Supply Chain Services 5,593 5,332 16,522 14,311 Total Segments Operating Income $ 58,189 $ 48,377 $ 178,434 $ 132,870 The following table presents reconciliations of income from operations for reportable segments to the consolidated income before taxes ( in thousands ): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Income from operations for reportable segments $ 58,189 $ 48,377 $ 178,434 $ 132,870 Adjustment for: Amortization of intangible assets 5,866 5,132 15,206 13,958 Corporate expenses 16,467 16,706 54,493 44,894 Income from operations $ 35,856 $ 26,539 108,735 74,018 Interest expense 12,684 6,833 36,068 17,610 Other (income) expense, net 1,234 1,565 522 2,941 Income before income taxes $ 21,938 $ 18,141 $ 72,145 $ 53,467 |
SHARE REPURCHASES
SHARE REPURCHASES | 9 Months Ended |
Sep. 30, 2023 | |
Equity [Abstract] | |
SHARE REPURCHASES | SHARE REPURCHASES On December 15, 2022, the Company announced a new Share Repurchase Program pursuant to which it may repurchase up to $85.0 million worth, or 2.8 million shares, of the Company's outstanding common stock over the next 24 months. Total consideration paid to repurchase the shares was recorded in shareholders’ equity as treasury shares. (in thousands, except share data) Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 Total number of shares purchased 618,282 1,706,637 Amount paid $ 21,508 $ 54,721 Average price paid per share $ 34.79 $ 32.06 |
BUSINESS ACQUISITIONS
BUSINESS ACQUISITIONS | 9 Months Ended |
Sep. 30, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
BUSINESS ACQUISITIONS | BUSINESS ACQUISITIONS On May 1, 2023, the Company completed the acquisition of Florida Valve EMD, a leading provider of valve and related products and services for the municipal water markets in the State of Florida. Florida Valve EMD is included within our IPS business segment. Total consideration for the transaction was approximately $3.3 million, funded with a mixture of cash on hand of $3.0 million and future consideration of $0.3 million. Goodwill for the transaction totaled approximately $2.4 million. On May 1, 2023, the Company completed the acquisition of Riordan, a leading provider of products for water treatment, wastewater treatment, odor control, solids handling, pumping and bio solid processes in the States of Maryland, New Jersey, Pennsylvania, Delaware and Virginia. Riordan is included within our IPS business segment. Total consideration for the transaction was approximately $8.4 million, funded with a mixture of cash on hand of $6.2 million and future consideration of $2.2 million. Goodwill for the transaction totaled approximately $5.9 million. In aggregate, the acquisition-date fair value of the consideration transferred for the two businesses totaled $11.7 million, which consisted of the following ( in thousands ): Purchase Price Consideration Cash payments $ 9,200 Future consideration 2,498 Total purchase price consideration $ 11,698 Pro forma results of operations information have not been presented, as the effect of the recent acquisitions is not material. The operating results of Riordan and Florida Valve EMD are included within the Company's consolidated statements of operations since the acquisition date of May 1, 2023 and were not material for the nine months ended September 30, 2023. Pursuant to U.S. GAAP, costs incurred to complete the acquisitions as well as costs incurred to integrate into the Company’s operations are expensed as incurred. Transaction-related costs incurred, which are included within selling, general, and administrative expenses in the consolidated statements of operations, were not material for the nine months ended September 30, 2023. The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date ( in thousands ): Amount Cash $ 352 Accounts receivable 2,236 Inventory 355 Other current assets 134 Non-compete agreements 595 Customer relationships 1,708 Property and equipment 41 Other assets 5 Assets acquired 5,426 Current liabilities assumed (1,395) Other long term liabilities (23) Deferred tax liability (538) Net assets acquired 3,470 Total Consideration 11,698 Goodwill $ 8,228 Of the $2.3 million of acquired intangible assets, $0.6 million was provisionally assigned to non-compete agreements that are subject to amortization over 5 years, coinciding with the terms of the agreements. In addition, $1.7 million was assigned to customer relationships and will be amortized over a period of 8 years. The goodwill total of approximately $8.2 million is attributable primarily to expected synergies and the assembled workforce of each entity and is generally not deductible for tax purposes. The Company recognized approximately $400 thousand of acquisition related costs that were expensed during the year. These costs are included in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income in Selling, General and Administrative costs. |
SUPPLEMENTAL CASH FLOW INFORMAT
SUPPLEMENTAL CASH FLOW INFORMATION | 9 Months Ended |
Sep. 30, 2023 | |
Supplemental Cash Flow Information [Abstract] | |
SUPPLEMENTAL CASH FLOW INFORMATION | SUPPLEMENTAL CASH FLOW INFORMATION Nine Months Ended September 30, 2023 2022 Supplemental disclosures of cash flow information: Cash paid for interest $ 33,892 $ 16,253 Cash paid for income taxes $ 20,298 $ 12,220 Cash paid for finance lease liability $ 1,632 $ — Shares issued for acquisition $ — $ 5,757 Non-cash investing and financing activities: Assets obtained in exchange for finance lease obligations $ 10,819 $ — |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | 9 Months Ended |
Sep. 30, 2023 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENT | SUBSEQUENT EVENT Senior Secured Term Loan B On October 13, 2023, the Company entered into an amendment (the “Second Term Loan Amendment”) on its existing Senior Secured Term Loan B, borrowing an incremental $125 million that was added to the existing Senior Secured Term Loan B. Including the new borrowings, the Company will have $550.0 million in Senior Secured Term Loan B borrowings. The Term Loan B borrowings mature on October 30, 2030, and are priced at Term SOFR plus an applicable margin of 4.75 percent. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of PresentationThe Company's financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). For interim financial reporting not all disclosures normally required in annual consolidated financial statements prepared in accordance with U.S. GAAP are required. The unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2022 that are included in our annual report on Form 10-K filed with the SEC on April 17, 2023 (“Annual Report”). The results of operations for the nine months ended September 30, 2023 are not necessarily indicative of results expected for the full fiscal year. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary for the fair statement of the Company's financial position, results of operations and cash flows for the interim periods presented. The ownership interest of noncontrolling investors of the Company's subsidiaries are recorded as noncontrolling interest. |
Consolidation | All inter-company accounts and transactions have been eliminated in consolidation. |
Accounting Pronouncements Not Yet Adopted | The Company has implemented all new accounting pronouncements that are in effect and is evaluating any new accounting pronouncements that may impact its financial statements, including the new Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers standard. The Company does not believe the new accounting pronouncement will have a material impact on its financial position or results of operations for recent acquisitions. Accounting Pronouncements Not Yet Adopted All other new accounting pronouncements that have been issued, but not yet effective, are currently being evaluated and at this time are not expected to have a material impact on our financial position or results of operations. |
Fair Value of Financial Assets and Liabilities | FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIESOur acquisitions may include contingent consideration as part of the purchase price. The fair value of the contingent consideration is estimated as of the acquisition date based on the present value of the contingent payments to be made using a weighted probability of possible payments. The unobservable inputs used in the determination of the fair value of the contingent consideration include management's assumptions about the likelihood of payment based on the established benchmarks, discount rates, and an internal rate of return analysis. The fair value measurement includes inputs that are Level 3 inputs as they are not observable in the market. Should actual results increase or decrease as compared to the assumptions used in our analysis, the fair value of the contingent consideration obligations will increase or decrease, up to the contracted limit, as applicable. Changes in the fair value of the contingent consideration are measured each reporting period and reflected in our results of operations. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Impacts of Revisions on Financials | The revision for the unaudited condensed consolidated statement of cash flows for the nine months ended September 30, 2022, is provided in the following table ( in thousands ): As Previously Reported Adjustments Revised Proceeds from asset-backed credit facility $ 605,257 $ (27,258) $ 577,999 Payments on asset-backed credit facility (564,651) 27,258 (537,393) |
FAIR VALUE OF FINANCIAL ASSET_2
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Fair Value Disclosures [Abstract] | |
Schedule of Reconciliation of the Beginning and Ending Balance and Gains or Losses Recognized | The following table provides a reconciliation of the beginning and ending balances and gains or losses recognized during the nine months ended September 30, 2023 ( in thousands ): Contingent Consideration *Beginning balance at December 31, 2022 $ 10,166 Acquisitions and settlements: Acquisitions ( Note 12 ) 2,498 Settlements (5,250) Total remeasurement adjustments: Changes in fair value recorded in other (income) expense, net 1,502 *Ending Balance at September 30, 2023 $ 8,916 *Amounts included in other current liabilities were $5.2 million and $5.5 million for the periods ending September 30, 2023 and December 31, 2022, respectively. Amounts included in long-term liabilities were $3.7 million and $4.7 million for the periods ending September 30, 2023 and December 31, 2022, respectively. |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Inventory Disclosure [Abstract] | |
Schedule of Carrying Values of Inventories | The carrying values of inventories are as follows ( in thousands ): September 30, 2023 December 31, 2022 Finished goods $ 77,539 $ 82,906 Work in process 27,606 18,486 Inventories $ 105,145 $ 101,392 |
CONTRACT ASSETS AND LIABILITI_2
CONTRACT ASSETS AND LIABILITIES (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Contractors [Abstract] | |
Schedule of Costs and Estimated Profits on Uncompleted Contracts Included in Condensed Consolidated Balance Sheets | Costs and estimated profits on uncompleted contracts and related amounts billed were as follows ( in thousands ): September 30, 2023 December 31, 2022 Costs incurred on uncompleted contracts $ 96,903 $ 70,329 Estimated profits, thereon 34,852 23,274 Total costs and estimated profits on uncompleted contracts 131,755 93,603 Less: billings to date 91,717 80,421 Net $ 40,038 $ 13,182 Such amounts were included in the accompanying unaudited condensed consolidated balance sheets for September 30, 2023 and December 31, 2022 under the following captions ( in thousands ): September 30, 2023 December 31, 2022 Costs and estimated profits in excess of billings $ 47,211 $ 23,588 Billings in excess of costs and estimated profits (7,181) (10,411) Translation adjustment 8 5 Net $ 40,038 $ 13,182 |
LONG-TERM DEBT (Tables)
LONG-TERM DEBT (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Debt Disclosure [Abstract] | |
Schedule of Components of Company's Long-term Debt | The components of the Company's long-term debt consisted of the following ( in thousands ): September 30, 2023 December 31, 2022 Carrying Value (1) Fair Value Carrying Value (1) Fair Value ABL Revolver $ — $ — $ — $ — Term Loan B 424,857 424,857 428,133 411,008 Total debt 424,857 424,857 428,133 411,008 Less: current portion (4,369) (4,369) (4,369) (4,194) Long-term debt less current maturities $ 420,488 $ 420,488 $ 423,764 $ 406,814 (1) Carrying value amounts do not include unamortized debt issuance costs of $12.4 million and $14.6 million for September 30, 2023 and December 31, 2022, respectively. |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Earnings Per Share [Abstract] | |
Schedule of Computation of Basic and Diluted Earnings per Share | The following table sets forth the computation of basic and diluted earnings per share for the periods indicated ( in thousands, except per share data ): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Basic earnings per share: Weighted average shares outstanding 16,516 18,820 17,104 18,712 Net income attributable to DXP Enterprises, Inc. $ 16,172 $ 13,929 $ 52,806 $ 41,003 Convertible preferred stock dividend 22 22 67 67 Net income attributable to common shareholders $ 16,150 $ 13,907 $ 52,739 $ 40,936 Per share amount $ 0.98 $ 0.74 $ 3.08 $ 2.19 Diluted earnings per share: Weighted average shares outstanding 16,516 18,820 17,104 18,712 Assumed conversion of convertible preferred stock 840 840 840 840 Total dilutive shares 17,356 19,660 17,944 19,552 Net income attributable to common shareholders $ 16,150 $ 13,907 $ 52,739 $ 40,936 Convertible preferred stock dividend 22 22 67 67 Net income attributable to DXP Enterprises, Inc. $ 16,172 $ 13,929 $ 52,806 $ 41,003 Per share amount $ 0.93 $ 0.71 $ 2.94 $ 2.10 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Segment Reporting [Abstract] | |
Schedule of Financial Information Regarding Company's Segments | The following table sets out financial information related to the Company's segments excluding amortization ( in thousands ): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Sales Service Centers $ 294,458 $ 260,083 $ 888,116 $ 729,977 Innovative Pumping Solutions 58,963 59,044 184,402 169,890 Supply Chain Services 65,828 68,187 199,038 174,670 Total Sales $ 419,249 $ 387,314 $ 1,271,556 $ 1,074,537 Operating Income Service Centers $ 41,441 $ 35,718 $ 130,274 $ 95,437 Innovative Pumping Solutions 11,155 7,327 31,638 23,122 Supply Chain Services 5,593 5,332 16,522 14,311 Total Segments Operating Income $ 58,189 $ 48,377 $ 178,434 $ 132,870 |
Schedule of Reconciliation of Operating Income for Reportable Segments to Consolidated Income Before Taxes | The following table presents reconciliations of income from operations for reportable segments to the consolidated income before taxes ( in thousands ): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Income from operations for reportable segments $ 58,189 $ 48,377 $ 178,434 $ 132,870 Adjustment for: Amortization of intangible assets 5,866 5,132 15,206 13,958 Corporate expenses 16,467 16,706 54,493 44,894 Income from operations $ 35,856 $ 26,539 108,735 74,018 Interest expense 12,684 6,833 36,068 17,610 Other (income) expense, net 1,234 1,565 522 2,941 Income before income taxes $ 21,938 $ 18,141 $ 72,145 $ 53,467 |
SHARE REPURCHASES (Tables)
SHARE REPURCHASES (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Equity [Abstract] | |
Schedule of Share Repurchase | Total consideration paid to repurchase the shares was recorded in shareholders’ equity as treasury shares. (in thousands, except share data) Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 Total number of shares purchased 618,282 1,706,637 Amount paid $ 21,508 $ 54,721 Average price paid per share $ 34.79 $ 32.06 |
BUSINESS ACQUISITIONS (Tables)
BUSINESS ACQUISITIONS (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
Schedule of Purchase Price Consideration | In aggregate, the acquisition-date fair value of the consideration transferred for the two businesses totaled $11.7 million, which consisted of the following ( in thousands ): Purchase Price Consideration Cash payments $ 9,200 Future consideration 2,498 Total purchase price consideration $ 11,698 |
Schedule of Estimated Fair Values of Assets Acquired and Liabilities Assumed | The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date ( in thousands ): Amount Cash $ 352 Accounts receivable 2,236 Inventory 355 Other current assets 134 Non-compete agreements 595 Customer relationships 1,708 Property and equipment 41 Other assets 5 Assets acquired 5,426 Current liabilities assumed (1,395) Other long term liabilities (23) Deferred tax liability (538) Net assets acquired 3,470 Total Consideration 11,698 Goodwill $ 8,228 |
SUPPLEMENTAL CASH FLOW INFORM_2
SUPPLEMENTAL CASH FLOW INFORMATION (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Supplemental Cash Flow Information [Abstract] | |
Supplemental Disclosures of Cash Flow Information | Nine Months Ended September 30, 2023 2022 Supplemental disclosures of cash flow information: Cash paid for interest $ 33,892 $ 16,253 Cash paid for income taxes $ 20,298 $ 12,220 Cash paid for finance lease liability $ 1,632 $ — Shares issued for acquisition $ — $ 5,757 Non-cash investing and financing activities: Assets obtained in exchange for finance lease obligations $ 10,819 $ — |
THE COMPANY (Details)
THE COMPANY (Details) | 9 Months Ended |
Sep. 30, 2023 segment | |
THE COMPANY [Abstract] | |
Number of business segments | 3 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Borrowings on asset-backed credit facility | $ 7,870 | $ 577,999 |
Repayments on asset-backed credit facility | $ (7,870) | (537,393) |
As Previously Reported | ||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Borrowings on asset-backed credit facility | 605,257 | |
Repayments on asset-backed credit facility | (564,651) | |
Adjustments | ||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Borrowings on asset-backed credit facility | (27,258) | |
Repayments on asset-backed credit facility | $ 27,258 |
FAIR VALUE OF FINANCIAL ASSET_3
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES - Narrative (Details) $ in Millions | Sep. 30, 2023 USD ($) |
PMI, Burlingame, Drydon, Cisco and Sullivan | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Contingent consideration payable under arrangements | $ 10.4 |
PMI, Burlingame, Drydon, Cisco and Sullivan | Valuation Technique, Discounted Cash Flow And Weighted Probability Of Possible Payments | Fair Value, Inputs, Level 3 | Annualized EBITDA And Probability Of Achievement | Minimum | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Discount rate | 0.111 |
Drydon | Other Current and Long-term Liabilities | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Liability for contingent consideration | $ 1.8 |
Cisco | Other Current and Long-term Liabilities | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Liability for contingent consideration | 2.4 |
Sullivan | Other Current and Long-term Liabilities | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Liability for contingent consideration | 1.6 |
Florida Valve EMD | Other Current and Long-term Liabilities | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Liability for contingent consideration | 0.3 |
Riordan | Other Current and Long-term Liabilities | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Liability for contingent consideration | $ 2.8 |
FAIR VALUE OF FINANCIAL ASSET_4
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES - Reconciliation of Beginning and Ending Balances (Details) - Fair Value, Measurements, Recurring - Fair Value, Inputs, Level 3 - Contingent Consideration Liability $ in Thousands | 9 Months Ended |
Sep. 30, 2023 USD ($) | |
Contingent Consideration | |
Beginning balance | $ 10,166 |
Acquisitions | 2,498 |
Settlements | (5,250) |
Changes in fair value recorded in other (income) expense, net | 1,502 |
Ending Balance | 8,916 |
Other Current Liabilities | |
Contingent Consideration | |
Beginning balance | 5,500 |
Ending Balance | 5,200 |
Other Noncurrent Liabilities | |
Contingent Consideration | |
Beginning balance | 4,700 |
Ending Balance | $ 3,700 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Inventory Disclosure [Abstract] | ||
Finished goods | $ 77,539 | $ 82,906 |
Work in process | 27,606 | 18,486 |
Inventories | $ 105,145 | $ 101,392 |
CONTRACT ASSETS AND LIABILITI_3
CONTRACT ASSETS AND LIABILITIES (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2023 | Dec. 31, 2022 | |
Schedule of costs and estimated earnings on uncompleted contracts [Abstract] | ||
Costs incurred on uncompleted contracts | $ 96,903 | $ 70,329 |
Estimated profits, thereon | 34,852 | 23,274 |
Total costs and estimated profits on uncompleted contracts | 131,755 | 93,603 |
Less: billings to date | 91,717 | 80,421 |
Net | 40,038 | 13,182 |
Schedule of Costs and Estimated Earnings on Uncompleted Contracts Included in Condensed Consolidated Balance Sheets [Abstract] | ||
Costs and estimated profits in excess of billings | 47,211 | 23,588 |
Billings in excess of costs and estimated profits | (7,181) | (10,411) |
Translation adjustment | 8 | 5 |
Net | 40,038 | $ 13,182 |
Balances previously classified as contract liabilities at the beginning of the period that have shipped | $ 10,000 |
INCOME TAXES (Details)
INCOME TAXES (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Income Tax Disclosure [Abstract] | ||||
Effective tax rate from continuing operations, expense (benefit) | 26.30% | 28.10% | 26.80% | 25.10% |
LONG-TERM DEBT - Components of
LONG-TERM DEBT - Components of Long-term Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | Dec. 31, 2022 |
Borrowings [Abstract] | ||
Unamortized debt issuance costs | $ 12,400 | $ 14,600 |
Carrying Value | ||
Borrowings [Abstract] | ||
Total debt | 424,857 | 428,133 |
Less: current portion | (4,369) | (4,369) |
Long-term debt less current maturities | 420,488 | 423,764 |
Carrying Value | ABL Revolver | ||
Borrowings [Abstract] | ||
Total debt | 0 | 0 |
Carrying Value | Term Loan B | ||
Borrowings [Abstract] | ||
Total debt | 424,857 | 428,133 |
Fair Value | ||
Borrowings [Abstract] | ||
Total debt | 424,857 | 411,008 |
Less: current portion | (4,369) | (4,194) |
Long-term debt less current maturities | 420,488 | 406,814 |
Fair Value | ABL Revolver | ||
Borrowings [Abstract] | ||
Total debt | 0 | 0 |
Fair Value | Term Loan B | ||
Borrowings [Abstract] | ||
Total debt | $ 424,857 | $ 411,008 |
LONG-TERM DEBT - Narrative (Det
LONG-TERM DEBT - Narrative (Details) - USD ($) $ in Millions | Nov. 22, 2022 | Jul. 19, 2022 | Sep. 30, 2023 |
Asset-backed Revolving Line of Credit | ABL Revolver | |||
Debt Instrument [Line Items] | |||
Maximum borrowing capacity under credit agreement | $ 135 | ||
Increase in borrowing capacity under credit agreement | 50 | ||
Minimum increments under credit agreement | $ 10 | ||
Amount outstanding under credit facility | $ 0 | ||
Borrowing capacity | 131.9 | ||
Letters of credit outstanding, amount | 3.1 | ||
Secured Debt | Senior Secured Term Loan B | |||
Debt Instrument [Line Items] | |||
Debt issued | $ 330 | ||
Increase in borrowing capacity | $ 105 | ||
Total debt | $ 424.9 | ||
Quarterly installments of term loan payable | 0.25% | ||
Maximum increase in maximum borrowing capacity | $ 85 | ||
Secured leverage ratio | 375% | ||
Percentage of excess cash flow | 50% | ||
Secured Debt | Senior Secured Term Loan B | Debt Covenant Total Leverage Ratio One | |||
Debt Instrument [Line Items] | |||
Percentage of excess cash flow | 25% | ||
Total leverage ratio | 300% | ||
Secured Debt | Senior Secured Term Loan B | Debt Covenant Total Leverage Ratio Two | |||
Debt Instrument [Line Items] | |||
Percentage of excess cash flow | 0% | ||
Total leverage ratio | 250% | ||
Secured Debt | Senior Secured Term Loan B | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate | |||
Debt Instrument [Line Items] | |||
Margin rate | 5.25% |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Basic earnings per share: | ||||
Weighted average shares outstanding (in shares) | 16,516 | 18,820 | 17,104 | 18,712 |
Net income attributable to DXP Enterprises, Inc. | $ 16,172 | $ 13,929 | $ 52,806 | $ 41,003 |
Convertible preferred stock dividend | 22 | 22 | 67 | 67 |
Net income attributable to common shareholders | $ 16,150 | $ 13,907 | $ 52,739 | $ 40,936 |
Per share amount (in dollars per share) | $ 0.98 | $ 0.74 | $ 3.08 | $ 2.19 |
Diluted earnings per share: | ||||
Weighted average shares outstanding (in shares) | 16,516 | 18,820 | 17,104 | 18,712 |
Assumed conversion of convertible preferred stock (in shares) | 840 | 840 | 840 | 840 |
Total dilutive shares (in shares) | 17,356 | 19,660 | 17,944 | 19,552 |
Net income attributable to common shareholders | $ 16,150 | $ 13,907 | $ 52,739 | $ 40,936 |
Convertible preferred stock dividend | 22 | 22 | 67 | 67 |
Net income attributable to DXP Enterprises, Inc. | $ 16,172 | $ 13,929 | $ 52,806 | $ 41,003 |
Per share amount (in dollars per share) | $ 0.93 | $ 0.71 | $ 2.94 | $ 2.10 |
SEGMENT REPORTING - Financial I
SEGMENT REPORTING - Financial Information of Company's Segments (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Segment Reporting Information, Profit (Loss) [Abstract] | ||||
Total Sales | $ 419,249 | $ 387,314 | $ 1,271,556 | $ 1,074,537 |
Total Segments Operating Income | 58,189 | 48,377 | 178,434 | 132,870 |
Service Centers | ||||
Segment Reporting Information, Profit (Loss) [Abstract] | ||||
Total Sales | 294,458 | 260,083 | 888,116 | 729,977 |
Total Segments Operating Income | 41,441 | 35,718 | 130,274 | 95,437 |
Innovative Pumping Solutions | ||||
Segment Reporting Information, Profit (Loss) [Abstract] | ||||
Total Sales | 58,963 | 59,044 | 184,402 | 169,890 |
Total Segments Operating Income | 11,155 | 7,327 | 31,638 | 23,122 |
Supply Chain Services | ||||
Segment Reporting Information, Profit (Loss) [Abstract] | ||||
Total Sales | 65,828 | 68,187 | 199,038 | 174,670 |
Total Segments Operating Income | $ 5,593 | $ 5,332 | $ 16,522 | $ 14,311 |
SEGMENT REPORTING - Reconciliat
SEGMENT REPORTING - Reconciliation of Operating Income to Consolidated Income (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Segment Reporting Information, Operating Income (Loss) [Abstract] | ||||
Income from operations for reportable segments | $ 58,189 | $ 48,377 | $ 178,434 | $ 132,870 |
Adjustment for: | ||||
Amortization of intangible assets | 5,866 | 5,132 | 15,206 | 13,958 |
Corporate expenses | 16,467 | 16,706 | 54,493 | 44,894 |
Income from operations | 35,856 | 26,539 | 108,735 | 74,018 |
Interest expense | 12,684 | 6,833 | 36,068 | 17,610 |
Other (income) expense, net | 1,234 | 1,565 | 522 | 2,941 |
Income before income taxes | $ 21,938 | $ 18,141 | $ 72,145 | $ 53,467 |
SHARE REPURCHASES - Narrative (
SHARE REPURCHASES - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||||
Dec. 15, 2022 | Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Sep. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2023 | |
Class of Stock [Line Items] | |||||||
Share repurchased | $ 22,027 | $ 25,053 | $ 9,135 | $ 3,355 | $ 1,513 | ||
Common stock | |||||||
Class of Stock [Line Items] | |||||||
Total number of shares repurchased (in shares) | 618,282 | 1,706,637 | |||||
Share repurchased | $ 21,508 | $ 54,721 | |||||
Share Repurchase Program December 2022 | |||||||
Class of Stock [Line Items] | |||||||
Share repurchase period (in months) | 24 months | ||||||
Share Repurchase Program December 2022 | Common stock | |||||||
Class of Stock [Line Items] | |||||||
Share repurchase, amount authorized | $ 85,000 | ||||||
Shares repurchase, shares authorized (in shares) | 2,800,000 |
SHARE REPURCHASES - Schedule of
SHARE REPURCHASES - Schedule of Share Repurchases (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Sep. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2023 | |
Class of Stock [Line Items] | ||||||
Amount paid | $ 22,027 | $ 25,053 | $ 9,135 | $ 3,355 | $ 1,513 | |
Common stock | ||||||
Class of Stock [Line Items] | ||||||
Total number of shares repurchased (in shares) | 618,282 | 1,706,637 | ||||
Amount paid | $ 21,508 | $ 54,721 | ||||
Average price paid per share (in dollars per share) | $ 34.79 | $ 32.06 |
BUSINESS ACQUISITIONS - Narrati
BUSINESS ACQUISITIONS - Narrative (Details) $ in Thousands | May 01, 2023 USD ($) business | Sep. 30, 2023 USD ($) | Dec. 31, 2022 USD ($) |
Business Acquisition [Line Items] | |||
Goodwill | $ 342,122 | $ 333,759 | |
Acquisitions 2023 | |||
Business Acquisition [Line Items] | |||
Total purchase price consideration | $ 11,698 | ||
Future consideration | 2,498 | ||
Goodwill | $ 8,228 | ||
Number of acquisitions | business | 2 | ||
Acquired intangible assets | $ 2,300 | ||
Acquisition related costs | 400 | ||
Acquisitions 2023 | Non-compete agreements | |||
Business Acquisition [Line Items] | |||
Acquired intangible assets | $ 600 | ||
Amortization period of acquired intangible assets (in years) | 5 years | ||
Acquisitions 2023 | Customer relationships | |||
Business Acquisition [Line Items] | |||
Acquired intangible assets | $ 1,700 | ||
Amortization period of acquired intangible assets (in years) | 8 years | ||
Florida Valve EMD | |||
Business Acquisition [Line Items] | |||
Total purchase price consideration | $ 3,300 | ||
Cash paid on hand | 3,000 | ||
Future consideration | 300 | ||
Goodwill | 2,400 | ||
Riordan | |||
Business Acquisition [Line Items] | |||
Total purchase price consideration | 8,400 | ||
Cash paid on hand | 6,200 | ||
Future consideration | 2,200 | ||
Goodwill | $ 5,900 |
BUSINESS ACQUISITIONS - Purchas
BUSINESS ACQUISITIONS - Purchase Price Consideration (Details) - Acquisitions 2023 $ in Thousands | May 01, 2023 USD ($) |
Business Acquisition [Line Items] | |
Cash payments | $ 9,200 |
Future consideration | 2,498 |
Total purchase price consideration | $ 11,698 |
BUSINESS ACQUISITIONS - Estimat
BUSINESS ACQUISITIONS - Estimated Fair Values of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands | Sep. 30, 2023 | May 01, 2023 | Dec. 31, 2022 |
Business Acquisition [Line Items] | |||
Goodwill | $ 342,122 | $ 333,759 | |
Acquisitions 2023 | |||
Business Acquisition [Line Items] | |||
Cash | $ 352 | ||
Accounts receivable | 2,236 | ||
Inventory | 355 | ||
Other current assets | 134 | ||
Property and equipment | 41 | ||
Other assets | 5 | ||
Assets acquired | 5,426 | ||
Current liabilities assumed | (1,395) | ||
Other long term liabilities | (23) | ||
Deferred tax liability | (538) | ||
Net assets acquired | 3,470 | ||
Total Consideration | 11,698 | ||
Goodwill | 8,228 | ||
Acquisitions 2023 | Non-compete agreements | |||
Business Acquisition [Line Items] | |||
Finite-lived intangibles | 595 | ||
Acquisitions 2023 | Customer relationships | |||
Business Acquisition [Line Items] | |||
Finite-lived intangibles | $ 1,708 |
SUPPLEMENTAL CASH FLOW INFORM_3
SUPPLEMENTAL CASH FLOW INFORMATION (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Supplemental disclosures of cash flow information: | |||||
Cash paid for interest | $ 33,892 | $ 16,253 | |||
Cash paid for income taxes | 20,298 | 12,220 | |||
Principal payments on finance leases | 1,632 | 0 | |||
Issuance of shares of common stock | $ 1,013 | $ 4,217 | $ 527 | 0 | 5,757 |
Non-cash investing and financing activities: | |||||
Assets obtained in exchange for finance lease obligations | $ 10,819 | $ 0 |
SUBSEQUENT EVENT (Details)
SUBSEQUENT EVENT (Details) - Secured Debt - USD ($) $ in Millions | Oct. 13, 2023 | Nov. 22, 2022 |
Senior Secured Term Loan B | ||
Subsequent Event [Line Items] | ||
Increase in borrowing capacity | $ 105 | |
Debt issued | $ 330 | |
Senior Secured Term Loan B | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate | ||
Subsequent Event [Line Items] | ||
Margin rate | 5.25% | |
Subsequent Event | Senior Secured Term Loan B, Second Term Loan Amendment | ||
Subsequent Event [Line Items] | ||
Increase in borrowing capacity | $ 125 | |
Subsequent Event | Senior Secured Term Loan B | ||
Subsequent Event [Line Items] | ||
Debt issued | $ 550 | |
Subsequent Event | Senior Secured Term Loan B | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate | ||
Subsequent Event [Line Items] | ||
Margin rate | 4.75% |