Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 09, 2017 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | DXP ENTERPRISES INC | |
Entity Central Index Key | 1,020,710 | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 17,391,816 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2017 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash | $ 19,473 | $ 1,590 |
Restricted Cash | 3,614 | 0 |
Trade accounts receivable, net of allowance for doubtful accounts of $9,634 in 2017 and $8,160 in 2016 | 165,235 | 148,919 |
Inventories, net | 87,720 | 83,699 |
Costs and estimated profits in excess of billings on uncompleted contracts | 24,191 | 18,421 |
Prepaid expenses and other current assets | 4,290 | 2,138 |
Income taxes recoverable | 2,404 | 2,558 |
Total current assets | 306,927 | 257,325 |
Property and equipment, net | 55,703 | 60,807 |
Goodwill | 187,591 | 187,591 |
Other intangible assets, net of accumulated amortization of $80,105 in 2017 and $70,027 in 2016 | 83,045 | 94,831 |
Other long-term assets | 1,809 | 1,498 |
Total assets | 635,075 | 602,052 |
Current liabilities: | ||
Current maturities of long-term debt | 3,365 | 51,354 |
Trade accounts payable | 81,518 | 78,698 |
Accrued wages and benefits | 14,735 | 16,962 |
Customer advances | 4,910 | 2,441 |
Billings in excess of costs and estimated profits on uncompleted contracts | 3,032 | 2,813 |
Other current liabilities | 14,726 | 14,391 |
Total current liabilities | 122,286 | 166,659 |
Long-term debt, less current maturities and unamortized debt issuance costs of $10,531 in 2017 and $992 in 2016 | 239,042 | 173,331 |
Deferred income taxes | 12,102 | 9,513 |
Commitments and contingencies (Note 13) | ||
Equity: | ||
Common stock, $0.01 par value, 100,000,000 shares authorized; 17,388,910 at September 30, 2017 and 17,197,380 at December 31, 2016 shares issued | 174 | 172 |
Additional paid-in capital | 152,857 | 152,313 |
Retained earnings | 127,560 | 117,396 |
Accumulated other comprehensive loss | (19,309) | (18,274) |
Total DXP Enterprises, Inc. equity | 261,298 | 251,623 |
Noncontrolling interest | 347 | 926 |
Total equity | 261,645 | 252,549 |
Total liabilities and equity | 635,075 | 602,052 |
Series A Preferred Stock [Member] | ||
Equity: | ||
Preferred stock | 1 | 1 |
Series B Convertible Preferred Stock [Member] | ||
Equity: | ||
Preferred stock | $ 15 | $ 15 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Current assets: | ||
Trade accounts receivable, allowance for doubtful accounts | $ 9,634 | $ 8,160 |
Other intangible assets accumulated amortization | 80,105 | 70,027 |
Current liabilities: | ||
Unamortized debt issuance costs - current | 744 | |
Unamortized debt issuance costs - noncurrent | $ 10,531 | $ 922 |
Equity: | ||
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 issued (in shares) | 17,388,910 | 17,197,380 |
Common stock shares outstanding (in shares) | 17,388,910 | 17,197,380 |
Series A Preferred Stock [Member] | ||
Equity: | ||
Preferred stock, voting rights | 1/10th vote per share | 1/10th vote per share |
Preferred stock, par value (in dollars per share) | $ 1 | $ 1 |
Preferred stock, liquidation preference (in dollars per share) | 112 | 112 |
Preferred stock, stated value (in dollars per share) | $ 100 | $ 100 |
Preferred stock, authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock, issued (in shares) | 1,122 | 1,122 |
Preferred stock, outstanding (in shares) | 1,122 | 1,122 |
Series B Convertible Preferred Stock [Member] | ||
Equity: | ||
Preferred stock, voting rights | 1/10th vote per share | 1/10th vote per share |
Preferred stock, par value (in dollars per share) | $ 1 | $ 1 |
Preferred stock, liquidation preference (in dollars per share) | 1,500 | 1,500 |
Preferred stock, stated value (in dollars per share) | $ 100 | $ 100 |
Preferred stock, authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock, issued (in shares) | 15,000 | 15,000 |
Preferred stock, outstanding (in shares) | 15,000 | 15,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE OPERATIONS (unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE OPERATIONS (unaudited) [Abstract] | ||||
Sales | $ 251,930 | $ 230,025 | $ 741,155 | $ 739,801 |
Cost of sales | 184,967 | 166,205 | 540,741 | 535,560 |
Gross profit | 66,963 | 63,820 | 200,414 | 204,241 |
Selling, general and administrative expenses | 60,453 | 58,887 | 175,411 | 192,461 |
Income from operations | 6,510 | 4,933 | 25,003 | 11,780 |
Other income, net | (153) | (251) | (324) | (397) |
Interest expense | 4,928 | 4,338 | 12,573 | 11,698 |
Income before provision for income taxes | 1,735 | 846 | 12,754 | 479 |
Provision (benefit) for income taxes | (1,176) | 664 | 2,880 | 459 |
Net income | 2,911 | 182 | 9,874 | 20 |
Net loss attributable to noncontrolling interest | (55) | (81) | (360) | (301) |
Net income attributable to DXP Enterprises, Inc. | 2,966 | 263 | 10,234 | 321 |
Preferred stock dividend | 23 | 23 | 68 | 68 |
Net income attributable to common shareholders | 2,943 | 240 | 10,166 | 253 |
Net income | 2,911 | 182 | 9,874 | 20 |
Cumulative translation adjustment | 830 | 19 | (1,035) | 409 |
Comprehensive income | $ 3,741 | $ 201 | $ 8,839 | $ 429 |
Basic earnings per share attributable to DXP Enterprises, Inc. (in dollars per share) | $ 0.17 | $ 0.02 | $ 0.58 | $ 0.02 |
Weighted average common shares outstanding (in shares) | 17,394 | 14,600 | 17,402 | 14,529 |
Diluted earnings per share attributable to DXP Enterprises, Inc. (in dollars per share) | $ 0.16 | $ 0.02 | $ 0.56 | $ 0.02 |
Weighted average common shares and common equivalent shares outstanding (in shares) | 18,234 | 15,440 | 18,242 | 15,369 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income attributable to DXP Enterprises, Inc. | $ 10,234 | $ 321 |
Less net loss attributable to non-controlling interest | (360) | (301) |
Net income | 9,874 | 20 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation | 7,655 | 9,070 |
Amortization of intangible assets | 12,943 | 13,557 |
Bad debt expense | 1,466 | 1,476 |
Amortization of debt issuance costs | 1,071 | 673 |
Write off of debt issuance costs | 578 | 967 |
Compensation expense for restricted stock | 1,392 | 1,944 |
Tax loss related to vesting of restricted stock | 0 | 619 |
Deferred income taxes | 2,000 | (121) |
Changes in operating assets and liabilities, net of assets and liabilities acquired in business combinations: | ||
Trade accounts receivable | (16,397) | 9,965 |
Costs and estimated profits in excess of billings on uncompleted contracts | (5,701) | 5,067 |
Inventories | (3,827) | 5,818 |
Prepaid expenses and other assets | (2,362) | (608) |
Trade accounts payable and accrued expenses | (354) | (8,560) |
Billings in excess of costs and estimated profits on uncompleted contracts | 189 | (4,171) |
Net cash provided by operating activities | 8,527 | 35,716 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (2,157) | (3,843) |
Proceeds from sale of property and equipment | 0 | 1,198 |
Equity method investment contribution | 0 | (3,214) |
Net cash used in investing activities | (2,157) | (5,859) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from debt | 728,822 | 324,229 |
Principal payments on revolving line of credit and other long-term debt | (701,561) | (356,497) |
Costs for registration of common shares | 0 | 5,959 |
Debt issuance fees | (11,188) | (616) |
Loss for non-controlling interest owners, net of tax | (219) | (186) |
Dividends paid | (68) | (68) |
Payment for employee taxes withheld from stock awards | (848) | (238) |
Tax loss related to vesting of restricted stock | 0 | (619) |
Net cash provided by (used in) financing activities | 14,938 | (28,036) |
EFFECT OF FOREIGN CURRENCY ON CASH | 189 | (85) |
NET CHANGE IN CASH | 21,497 | 1,736 |
CASH AT BEGINNING OF PERIOD | 1,590 | 1,693 |
CASH AT END OF PERIOD | $ 23,087 | $ 3,429 |
THE COMPANY
THE COMPANY | 9 Months Ended |
Sep. 30, 2017 | |
THE COMPANY [Abstract] | |
THE COMPANY | NOTE 1 - THE COMPANY DXP Enterprises, Inc. together with its subsidiaries (collectively "DXP," "Company," "us," "we," or "our") are engaged in the business of distributing maintenance, repair, and operating (MRO) products and services to industrial customers. Additionally, DXP provides integrated custom pump skid packages, pump remanufacturing, and manufactures branded private label pumps to industrial customers. The Company is organized into three business segments: Service Centers ("SC"), Supply Chain Services ("SCS"), and Innovative Pumping Solutions ("IPS"). See Note 14 for discussion of the business segments. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES | 9 Months Ended |
Sep. 30, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES Basis of Presentation The Company's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). The accompanying condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and its variable interest entity ("VIE"). The accompanying unaudited condensed consolidated financial statements have been prepared on substantially the same basis as our annual consolidated financial statements and should be read in conjunction with our annual report on Form 10-K for the year ended December 31, 2016. In the opinion of management, these condensed consolidated financial statements contain all adjustments necessary to present fairly the Company's condensed consolidated balance sheets as of December 31, 2016 and September 30, 2017 (unaudited), condensed consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2017 and September 30, 2016 (unaudited), and condensed consolidated statements of cash flows for the nine months ended September 30, 2017 and September 30, 2016 (unaudited). All such adjustments represent normal recurring items. DXP is the primary beneficiary of a VIE in which DXP owns 47.5% of the equity. DXP consolidates the financial statements of the VIE with the financial statements of DXP. As of September 30, 2017, the total assets of the VIE were approximately $5.4 million including approximately $4.9 million of property and equipment compared to $5.2 million of total assets and $5.2 million of property and equipment at December 31, 2016. DXP is the primary customer of the VIE. For the three months ended September 30, 2017 and 2016, consolidation of the VIE increased cost of sales by approximately $0.3 million and $0.2 million, respectively and increased SG&A by approximately $0.3 million and $58 thousand, respectively. For the nine months ended September 30, 2017 and 2016, consolidation of the VIE increased cost of sales by approximately $0.7 million and $0.8 million, respectively and increased SG&A by approximately $0.8 million and $0.2 million, respectively. The Company recognized a related income tax benefit of $33 thousand and $50 thousand, respectively, related to the VIE for the three months ended September 30, 2017 and 2016 and $219 thousand and $130 thousand, respectively, for the nine months ended September 30, 2017 and 2016. At September 30, 2017, the owners of 52.5% of the equity not owned by DXP included a former executive officer and other employees of DXP. Equity investments in which we exercise significant influence, but do not control and are not the primary beneficiary, are accounted for using the equity method of accounting. During the first quarter of 2016, DXP invested $4.0 million in a related party equity method investment . All intercompany accounts and transactions have been eliminated upon consolidation. |
RECENT ACCOUNTING PRONOUNCEMENT
RECENT ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Sep. 30, 2017 | |
RECENT ACCOUNTING PRONOUNCEMENTS [Abstract] | |
RECENT ACCOUNTING PRONOUNCEMENTS | NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS Standards Effective in 2017 or Earlier Accounting Changes and Error Corrections. Compensation – Stock Compensation. Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. he Company's Condensed Consolidated Financial Statements Topic Method of Adoption Impact on Consolidated Financial Statements Recognize all excess tax benefits and tax deficiencies as income tax benefit or expense Prospective The Company recognized $0.2 million and $0.3 million of excess tax benefit in income taxes in the three and nine months ended September 30, 2017, respectively, decreasing the effective tax rate for each period. Excess tax benefits and deficiencies on the statement of cash flows are classified as an operating activity Prospective The Company recognized $0.3 million of excess tax benefit in the nine months ended September 30, 2017 as an operating activity. Prior to the adoption of the ASU 2016-09, the excess tax expense in the nine months ended September 30, 2016 was $0.6 million recognized as a financing activity. Employee taxes paid when an employer withholds shares for tax-withholding purposes on the statement of cash flows are classified as financing activity Retrospective The Company reclassified $0.2 million of employee taxes paid from cash flows from operating activities to cash flows from financing on the Consolidated Statements of Cash Flows in the nine months ended September 30, 2016. Accounting for forfeitures and tax withholding elections Prospective The Company has not changed its accounting policy for forfeitures. There is no significant impact on Consolidated Financial Statements. Income Taxes. Income Taxes (Topic 740), Balance Sheet Classification of Deferred Taxes. reclassified $9.5 million of current deferred income tax assets from current assets to non-current deferred income tax liabilities on the Condensed Consolidated Balance Sheet as of December 31, 2016. Inventory. Inventory (Topic 330), Simplifying the Measurement of Inventory. Statement of Cash Flows. Statement of Cash Flows (Topic 230) Classification of Restricted Cash classified $3.6 million of cash to restricted cash. This cash deposit was required as collateral for letters of credit outstanding under our previously existing credit facility.; Standards Effective in 2018 or Later Compensation - Stock Compensation. Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. Intangibles-Goodwill and Other. Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. Business Combinations. Business Combinations (Topic 805): Clarifying the Definition of a Business. Statement of Cash Flows. Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments. Financial Instruments – Credit Losses. Financial Instruments – Credit Losses, . Leases. Leases (Topic 842). classification as a finance or operating lease. The criteria for determining whether a lease is a finance or operating lease has not been significantly changed by this ASU. The ASU also requires additional disclosure of the amount, timing, and uncertainty of cash flows arising from leases, including qualitative and quantitative requirements. This pronouncement is effective for financial statements issued for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Financial Instruments. Financial Instruments: Recognition and Measurement of Financial Assets and Financial Liabilities Revenue Recognition. Revenue from Contracts with Customers (Topic 606), The Company has evaluated the provisions of the new standard and is in the process of assessing its impact on financial statements, information systems, business processes and financial statement disclosures. We have engaged third party consultants to assist us in assessing our contracts with customers, processes and controls required to address the impact that ASU No. 2014-09 will have on our business. The Company believes that our current plan will enable us to implement our new procedures and controls; and assess the cumulative effect of applying ASU No. 2014-09 at the date of initial application. Based on our overall assessment performed to date, the standard is not expected to have a material impact on the Company's Consolidated Financial Statements. |
FAIR VALUE OF FINANCIAL ASSETS
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES | 9 Months Ended |
Sep. 30, 2017 | |
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES [Abstract] | |
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES | NOTE 4 - FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES Authoritative guidance for financial assets and liabilities measured on a recurring basis applies to all financial assets and financial liabilities that are being measured and reported on a fair value basis. Fair value, as defined in the authoritative guidance, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance affects the fair value measurement of an investment with quoted market prices in an active market for identical instruments, which must be classified in one of the following categories: Level 1 Inputs Level 1 inputs come from quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 Inputs Level 2 inputs are other than quoted prices that are observable for an asset or liability. These inputs include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from, or corroborated by, observable market data by correlation or other means. Level 3 Inputs Level 3 inputs are unobservable inputs for the asset or liability which require the Company's own assumptions. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. |
INVENTORIES, NET
INVENTORIES, NET | 9 Months Ended |
Sep. 30, 2017 | |
INVENTORIES, NET [Abstract] | |
INVENTORIES, NET | NOTE 5 – INVENTORIES, NET The carrying values of inventories are as follows ( in thousands September 30, 2017 December 31, 2016 Finished goods $ 75,213 $ 74,269 Work in progress 12,507 9,430 Inventories, net $ 87,720 $ 83,699 |
COSTS AND ESTIMATED PROFITS ON
COSTS AND ESTIMATED PROFITS ON UNCOMPLETED CONTRACTS | 9 Months Ended |
Sep. 30, 2017 | |
COSTS AND ESTIMATED PROFITS ON UNCOMPLETED CONTRACTS [Abstract] | |
COSTS AND ESTIMATED PROFITS ON UNCOMPLETED CONTRACTS | NOTE 6 – COSTS AND ESTIMATED PROFITS ON UNCOMPLETED CONTRACTS Costs and estimated profits in excess of billings on uncompleted contracts arise in the consolidated balance sheets when revenues have been recognized but the amounts cannot be billed under the terms of the contracts. Such amounts are recoverable from customers upon various measures of performance, including achievement of certain milestones, completion of specified units, or completion of a contract. Costs and estimated profits on uncompleted contracts and related amounts billed were as follows ( in thousands September 30, 2017 December 31, 2016 Costs incurred on uncompleted contracts $ 31,584 $ 25,214 Estimated profits, thereon 3,097 6,274 Total 34,681 31,488 Less: billings to date 13,530 15,864 Net $ 21,151 $ 15,624 Such amounts were included in the accompanying condensed consolidated balance sheets for 2017 and 2016 under the following captions ( in thousands September 30, 2017 December 31, 2016 Costs and estimated profits in excess of billings on uncompleted contracts $ 24,191 $ 18,421 Billings in excess of costs and estimated profits on uncompleted contracts (3,032 ) (2,813 ) Translation adjustment (8 ) 16 Net $ 21,151 $ 15,624 |
PROPERTY AND EQUIPMENT, NET
PROPERTY AND EQUIPMENT, NET | 9 Months Ended |
Sep. 30, 2017 | |
PROPERTY AND EQUIPMENT, NET [Abstract] | |
PROPERTY AND EQUIPMENT, NET | NOTE 7 - PROPERTY AND EQUIPMENT, NET The carrying values of property and equipment are as follows ( in thousands September 30, 2017 December 31, 2016 Land $ 2,345 $ 2,346 Buildings and leasehold improvements 16,668 16,259 Furniture, fixtures and equipment 96,337 94,784 Less – Accumulated depreciation (59,647 ) (52,582 ) Total property and equipment, net $ 55,703 $ 60,807 |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2017 | |
GOODWILL AND OTHER INTANGIBLE ASSETS [Abstract] | |
GOODWILL AND OTHER INTANGIBLE ASSETS | NOTE 8 - GOODWILL AND OTHER INTANGIBLE ASSETS The following table presents the changes in the carrying amount of goodwill and other intangible assets during the nine months ended September 30, 2017 ( in thousands Goodwill Other Intangible Assets Total Balance as of December 31, 2016 $ 187,591 $ 94,831 $ 282,422 Translation adjustment - 1,157 1,157 Amortization - (12,943 ) (12,943 ) Balance as of September 30, 2017 $ 187,591 $ 83,045 $ 270,636 The following table presents the goodwill balance by reportable segment (in thousands) September 30, 2017 December 31, 2016 Service Centers $ 154,473 $ 154,473 Innovative Pumping Solutions 15,980 15,980 Supply Chain Services 17,138 17,138 Total $ 187,591 $ 187,591 The following table presents a summary of amortizable other intangible assets ( in thousands As of September 30, 2017 As of December 31, 2016 Gross Carrying Amount Accumulated Amortization Carrying Amount, net Gross Carrying Amount Accumulated Amortization Carrying Amount, net Customer relationships $ 162,201 $ (79,315 ) $ 82,886 $ 163,022 $ (68,446 ) $ 94,576 Non-compete agreements 949 (790 ) 159 1,836 (1,581 ) 255 Total $ 163,150 $ (80,105 ) $ 83,045 $ 164,858 $ (70,027 ) $ 94,831 Gross carrying amounts as well as accumulated amortization are partially affected by the fluctuation of foreign currency rates. Other intangible assets are amortized according to estimated economic benefits over their estimated useful lives. |
LONG-TERM DEBT
LONG-TERM DEBT | 9 Months Ended |
Sep. 30, 2017 | |
LONG-TERM DEBT [Abstract] | |
LONG-TERM DEBT | NOTE 9 – LONG-TERM DEBT Long-term debt consisted of the following ( in thousands September 30, 2017 December 31, 2016 ABL Revolver $ - $ - Term Loan B 250,000 - Line of credit - 147,600 Term loan - 74,500 Promissory note payable in monthly installments at 2.9% through January 2021, collateralized by equipment 2,938 3,577 Less unamortized debt issuance costs (10,531 ) (992 ) 242,407 224,685 Less: Current portion (3,365 ) (51,354 ) Long-term debt less current maturities $ 239,042 $ 173,331 Senior Secured Term Loan B: On August 29, 2017, DXP entered into a six year Senior Secured Term Loan B (the "Term Loan") with an original principal amount of $250 million which amortizes in equal quarterly installments of 0.25% with the balance payable in August 2023, when the facility matures. Subject to securing additional lender commitments, the Term Loan allows for incremental increases in facility size up to an aggregate of $30 million, in minimum increments of $10 million, plus an additional amount such that DXP's secured leverage ratio (as defined under the Term Loan) would not exceed 3.60 to 1.00. We are required to repay the Term Loan in connection with certain asset sales and insurance proceeds, certain debt proceeds and 50% of excess cash flow, reducing to 25%, if our total leverage ratio is no more than 3.00 to 1.00 and 0%, if our total leverage ratio is no more than 2.50 to 1.00. In addition, the Term Loan contains a number of customary restrictive covenants. The interest rate for the Term Loan was 6.7 % as of September 30, 2017. The Term Loan B Agreement requires that the company's Secured Leverage Ratio, defined as the ratio, as of the last day of any fiscal quarter of consolidated secured debt (net of restricted cash, not to exceed $30 million) as of such day to EBITDA, beginning with the fiscal quarter ending December 31, 2017, is either equal to or less than as indicated in the table below: Fiscal Quarter Secured Leverage Ratio December 31, 2017 5.75:1.00 March 31, 2018 5.75:1.00 June 30, 2018 5.50:1.00 September 30, 2018 5.50:1.00 December 31, 2018 5.25:1.00 March 31, 2019 5.25:1.00 June 30, 2019 5.00:1.00 September 30, 2019 5.00:1.00 December 31, 2019 4.75:1.00 March 31, 2020 4.75:1.00 June 30, 2020 and each Fiscal Quarter thereafter 4.50:1.00 As of September 30, 2017, the company's consolidated Secured Leverage Ratio was 3.61 to 1.00. The Term Loan is guaranteed by each of the Company's direct and indirect material wholly owned subsidiaries, other than any of the Company's Canadian subsidiaries and certain other excluded subsidiaries. The Term Loan is secured by substantially all of the assets of the Company. ABL Facility On August 29, 2017, DXP also entered into a five year, $85 million Asset Based Loan and Security Agreement (the "ABL Credit Agreement"). The ABL Credit Agreement provides for asset-based revolving loans in an aggregate principal amount of up to $85.0 million (the "ABL Loans"). The ABL Loans may be increased, in increments of $10.0 million, up to an aggregate of $50.0 million. The facility will mature on August 29, 2022. Interest accrues on outstanding borrowings at a rate equal to LIBOR or CDOR plus a margin ranging from 1.25% to 1.75% per annum, or at an alternate base rate, Canadian prime rate or Canadian base rate plus a margin ranging from 0.25% to 0.75% per annum, in each case, based upon the average daily excess availability under the facility for the most recently completed calendar quarter. Fees ranging from 0.25% to 0.375% per annum are payable on the portion of the facility not in use at any given time. The obligations of the Borrowers are guaranteed by the Company and its direct and indirect material wholly-owned subsidiaries other than certain excluded subsidiaries. The ABL Credit Agreement contains a financial covenant restricting the Company from allowing its fixed charge coverage ratio be less than 1.00 to 1.00 during a compliance period, which is triggered when the availability under ABL Facility falls below a threshold set forth in the ABL Credit Agreement. The ABL Loan is secured by substantially all of the assets of the Company. Termination of Previously Existing Credit Facility As set forth above, on August 29, 2017, the Company terminated its previously existing credit agreement and facility and replaced it with the Term Loan and the ABL Credit Agreement. The terminated facility was under the Amended and Restated Credit Agreement, dated as of January 2, 2014, by and among the Company, as borrower, and Wells Fargo Bank, National Association, as issuing lender and administrative agent for other lenders (the "Original Credit Agreement"). This Original Credit Agreement was subsequently amended five times by the First Amendment to Restated Credit Agreement dated as of August 6, 2015, Second Amendment to Restated Credit Agreement dated as of September 30, 2015, Third Amendment to Restated Credit Agreement dated as of May 12, 2016, Fourth Amendment to Restated Credit Agreement dated as of August 15, 2016, and Fifth Amendment to Amended and Restated Credit Agreement dated as of November 28, 2016. A description of the material terms of these terminated agreements can be found in the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2017. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2017 | |
INCOME TAXES [Abstract] | |
INCOME TAXES | NOTE 10 – INCOME TAXES Our effective tax rate from continuing operations was a tax benefit of 67.8% for the three months ended September 30, 2017 compared to a tax expense of 78.5% for the three months ended September 30, 2016. Compared to the U.S. statutory rate for the three months ended September 30, 2017, the effective tax rate was increased by state taxes and nondeductible expenses. The effective tax rate was decreased by lower income tax rates on income earned in foreign jurisdictions, the change in valuation allowance recorded against deferred tax assets, and research and development tax credits. Compared to the U.S. statutory rate for the three months ended September 30, 2016, the effective tax rate was increased by state taxes and nondeductible expenses. Our effective tax rate from continuing operations was a tax expense of 22.6% for the nine months ended September 30, 2017 compared to a tax expense of 95.8% for the nine months ended September 30, 2016. Compared to the U.S. statutory rate for the nine months ended September 30, 2017, the effective tax rate was increased by state taxes and nondeductible expenses. The effective tax rate was decreased by lower income tax rates on income earned in foreign jurisdictions, the change in valuation allowance recorded against deferred tax assets, and research and development tax credits. Compared to the U.S. statutory rate for the nine months ended September 30, 2016, the effective tax rate was increased by state taxes and nondeductible expenses. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2017 | |
STOCK-BASED COMPENSATION [Abstract] | |
STOCK-BASED COMPENSATION | NOTE 11 - STOCK-BASED COMPENSATION Restricted Stock Under the restricted stock plans approved by our shareholders, directors, consultants and employees were awarded shares of DXP's common stock. The shares of restricted stock granted to employees and that are outstanding as of September 30, 2017 vest in accordance with one of the following vesting schedules: 100% one year after date of grant; 33.3% each year for three years after the date of grant; 20% each year for five years after the grant date; or 10% each year for ten years after the grant date. The shares of restricted stock granted to non-employee directors of DXP vest one year after the grant date. The fair value of restricted stock awards was measured based upon the closing prices of DXP's common stock on the grant dates and is recognized as compensation expense over the vesting period of the awards. Once restricted stock vests, new shares of the Company's stock are issued. At September 30, 2017, 401,223 shares were available for future grants. Changes in restricted stock for the nine months ended September 30, 2017 were as follows: Number of Shares Weighted Average Grant Price Non-vested at December 31, 2016 143,380 $ 26.76 Granted 18,672 $ 34.07 Forfeited (298 ) $ 59.60 Vested (79,853 ) $ 25.14 Non-vested at September 30, 2017 81,901 $ 29.88 Compensation expense, associated with restricted stock, recognized in the nine months ended September 30, 2017 and 2016 was $1.4 million and $1.9 million, respectively. Related income tax benefits recognized in earnings for the nine months ended September 30, 2017 and 2016 were approximately $0.6 |
EARNINGS PER SHARE DATA
EARNINGS PER SHARE DATA | 9 Months Ended |
Sep. 30, 2017 | |
EARNINGS PER SHARE DATA [Abstract] | |
EARNINGS PER SHARE DATA | NOTE 12 - EARNINGS PER SHARE DATA Basic 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, 2017 2016 2017 2016 Basic: Weighted average shares outstanding 17,394 14,600 17,402 14,529 Net income attributable to DXP Enterprises, Inc. $ 2,966 $ 263 $ 10,234 $ 321 Convertible preferred stock dividend 23 23 68 68 Net income attributable to common shareholders $ 2,943 $ 240 $ 10,166 $ 253 Per share amount $ 0.17 $ 0.02 $ 0.58 $ 0.02 Diluted: Weighted average shares outstanding 17,394 14,600 17,402 14,529 Assumed conversion of convertible preferred stock 840 840 840 840 Total dilutive shares 18,234 15,440 18,242 15,369 Net income attributable to common shareholders $ 2,943 $ 240 $ 10,166 $ 253 Convertible preferred stock dividend 23 23 68 68 Net income attributable to DXP Enterprises, Inc. for diluted earnings per share $ 2,966 $ 263 $ 10,234 $ 321 Per share amount $ 0.16 $ 0.02 $ 0.56 $ 0.02 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2017 | |
COMMITMENTS AND CONTINGENCIES [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 13 - COMMITMENTS AND CONTINGENCIES From 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 of these lawsuits, it believes that the ultimate resolution will not have, either individually or in 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, 2017 | |
SEGMENT REPORTING [Abstract] | |
SEGMENT REPORTING | NOTE 14 - 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 maintenance, MRO products, equipment and integrated services, including logistics capabilities, to industrial customers. The Service Centers segment provides a wide range of MRO products in the rotating equipment, bearing, power transmission, hose, fluid power, metal working, fastener, industrial supply, safety products and safety services categories. The Innovative Pumping Solutions segment fabricates and assembles custom-made pump packages, remanufactures pumps and manufactures branded private label pumps. 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. The high degree of integration of the Company's operations necessitates the use of a substantial number of allocations and apportionments in the determination of business segment information. Sales are shown net of intersegment eliminations. The following table sets out financial information related to the Company's segments ( in thousands For the Three Months Ended September 30, 2017 2016 SC IPS SCS Total SC IPS SCS Total Sales $ 160,863 $ 51,027 $ 40,040 $ 251,930 $ 152,018 $ 39,830 $ 38,177 $ 230,025 Amortization 2,262 1,803 271 4,336 2,292 1,956 271 4,519 Income (loss) from operations 13,288 35 3,711 17,034 11,053 (326 ) 3,658 14,385 Income from operations, excluding amortization $ 15,550 $ 1,838 $ 3,982 $ 21,370 $ 13,345 $ 1,630 $ 3,929 $ 18,904 For the Nine Months Ended September 30, 2017 2016 SC IPS SCS Total SC IPS SCS Total Sales $ 474,324 $ 144,555 $ 122,276 $ 741,155 $ 481,352 $ 141,614 $ 116,835 $ 739,801 Amortization 6,738 5,393 812 12,943 6,871 5,874 812 13,557 Income from operations 40,570 1,710 10,946 53,226 28,608 1,549 10,799 40,956 Income from operations, excluding amortization $ 47,308 $ 7,103 $ 11,758 $ 66,169 $ 35,479 $ 7,423 $ 11,611 $ 54,513 The following table presents reconciliations of operating income for reportable segments to the consolidated income before taxes ( in thousands Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Operating income for reportable segments, excluding amortization $ 21,370 $ 18,904 $ 66,169 $ 54,513 Adjustment for: Amortization of intangible assets 4,336 4,519 12,943 13,557 Corporate expense 10,524 9,452 28,223 29,176 Income from operations 6,510 4,933 25,003 11,780 Interest expense 4,928 4,338 12,573 11,698 Other income, net (153 ) (251 ) (324 ) (397 ) Income before income taxes $ 1,735 $ 846 $ 12,754 $ 479 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2017 | |
SUBSEQUENT EVENTS [Abstract] | |
SUBSEQUENT EVENTS | NOTE 15 - SUBSEQUENT EVENTS We have evaluated subsequent events through the date the interim Condensed Consolidated Financial Statements were issued. There were no subsequent events that required recognition or disclosure unless elsewhere identified in this report. |
SUMMARY OF SIGNIFICANT ACCOUN21
SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES [Abstract] | |
Basis of Presentation | Basis of Presentation The Company's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). The accompanying condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and its variable interest entity ("VIE"). The accompanying unaudited condensed consolidated financial statements have been prepared on substantially the same basis as our annual consolidated financial statements and should be read in conjunction with our annual report on Form 10-K for the year ended December 31, 2016. In the opinion of management, these condensed consolidated financial statements contain all adjustments necessary to present fairly the Company's condensed consolidated balance sheets as of December 31, 2016 and September 30, 2017 (unaudited), condensed consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2017 and September 30, 2016 (unaudited), and condensed consolidated statements of cash flows for the nine months ended September 30, 2017 and September 30, 2016 (unaudited). All such adjustments represent normal recurring items. DXP is the primary beneficiary of a VIE in which DXP owns 47.5% of the equity. DXP consolidates the financial statements of the VIE with the financial statements of DXP. As of September 30, 2017, the total assets of the VIE were approximately $5.4 million including approximately $4.9 million of property and equipment compared to $5.2 million of total assets and $5.2 million of property and equipment at December 31, 2016. DXP is the primary customer of the VIE. For the three months ended September 30, 2017 and 2016, consolidation of the VIE increased cost of sales by approximately $0.3 million and $0.2 million, respectively and increased SG&A by approximately $0.3 million and $58 thousand, respectively. For the nine months ended September 30, 2017 and 2016, consolidation of the VIE increased cost of sales by approximately $0.7 million and $0.8 million, respectively and increased SG&A by approximately $0.8 million and $0.2 million, respectively. The Company recognized a related income tax benefit of $33 thousand and $50 thousand, respectively, related to the VIE for the three months ended September 30, 2017 and 2016 and $219 thousand and $130 thousand, respectively, for the nine months ended September 30, 2017 and 2016. At September 30, 2017, the owners of 52.5% of the equity not owned by DXP included a former executive officer and other employees of DXP. Equity investments in which we exercise significant influence, but do not control and are not the primary beneficiary, are accounted for using the equity method of accounting. During the first quarter of 2016, DXP invested $4.0 million in a related party equity method investment . All intercompany accounts and transactions have been eliminated upon consolidation. |
INVENTORIES, NET (Tables)
INVENTORIES, NET (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
INVENTORIES, NET [Abstract] | |
Carrying Values of Inventories | The carrying values of inventories are as follows ( in thousands September 30, 2017 December 31, 2016 Finished goods $ 75,213 $ 74,269 Work in progress 12,507 9,430 Inventories, net $ 87,720 $ 83,699 |
COSTS AND ESTIMATED PROFITS O23
COSTS AND ESTIMATED PROFITS ON UNCOMPLETED CONTRACTS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
COSTS AND ESTIMATED PROFITS ON UNCOMPLETED CONTRACTS [Abstract] | |
Schedule of Costs and Estimated Profits on Uncompleted Contracts | Costs and estimated profits on uncompleted contracts and related amounts billed were as follows ( in thousands September 30, 2017 December 31, 2016 Costs incurred on uncompleted contracts $ 31,584 $ 25,214 Estimated profits, thereon 3,097 6,274 Total 34,681 31,488 Less: billings to date 13,530 15,864 Net $ 21,151 $ 15,624 |
Schedule of Costs and Estimated Earnings on Uncompleted Contracts Included in Condensed Consolidated Balance Sheets | Such amounts were included in the accompanying condensed consolidated balance sheets for 2017 and 2016 under the following captions ( in thousands September 30, 2017 December 31, 2016 Costs and estimated profits in excess of billings on uncompleted contracts $ 24,191 $ 18,421 Billings in excess of costs and estimated profits on uncompleted contracts (3,032 ) (2,813 ) Translation adjustment (8 ) 16 Net $ 21,151 $ 15,624 |
PROPERTY AND EQUIPMENT, NET (Ta
PROPERTY AND EQUIPMENT, NET (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
PROPERTY AND EQUIPMENT, NET [Abstract] | |
Carrying Values of Property and Equipment | The carrying values of property and equipment are as follows ( in thousands September 30, 2017 December 31, 2016 Land $ 2,345 $ 2,346 Buildings and leasehold improvements 16,668 16,259 Furniture, fixtures and equipment 96,337 94,784 Less – Accumulated depreciation (59,647 ) (52,582 ) Total property and equipment, net $ 55,703 $ 60,807 |
GOODWILL AND OTHER INTANGIBLE25
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
GOODWILL AND OTHER INTANGIBLE ASSETS [Abstract] | |
Goodwill and Other Intangible Assets | The following table presents the changes in the carrying amount of goodwill and other intangible assets during the nine months ended September 30, 2017 ( in thousands Goodwill Other Intangible Assets Total Balance as of December 31, 2016 $ 187,591 $ 94,831 $ 282,422 Translation adjustment - 1,157 1,157 Amortization - (12,943 ) (12,943 ) Balance as of September 30, 2017 $ 187,591 $ 83,045 $ 270,636 |
Goodwill Balance by Reportable Segment | The following table presents the goodwill balance by reportable segment (in thousands) September 30, 2017 December 31, 2016 Service Centers $ 154,473 $ 154,473 Innovative Pumping Solutions 15,980 15,980 Supply Chain Services 17,138 17,138 Total $ 187,591 $ 187,591 |
Amortizable Other Intangible Assets | The following table presents a summary of amortizable other intangible assets ( in thousands As of September 30, 2017 As of December 31, 2016 Gross Carrying Amount Accumulated Amortization Carrying Amount, net Gross Carrying Amount Accumulated Amortization Carrying Amount, net Customer relationships $ 162,201 $ (79,315 ) $ 82,886 $ 163,022 $ (68,446 ) $ 94,576 Non-compete agreements 949 (790 ) 159 1,836 (1,581 ) 255 Total $ 163,150 $ (80,105 ) $ 83,045 $ 164,858 $ (70,027 ) $ 94,831 |
LONG-TERM DEBT (Tables)
LONG-TERM DEBT (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
LONG-TERM DEBT [Abstract] | |
Long-term Debt | Long-term debt consisted of the following ( in thousands September 30, 2017 December 31, 2016 ABL Revolver $ - $ - Term Loan B 250,000 - Line of credit - 147,600 Term loan - 74,500 Promissory note payable in monthly installments at 2.9% through January 2021, collateralized by equipment 2,938 3,577 Less unamortized debt issuance costs (10,531 ) (992 ) 242,407 224,685 Less: Current portion (3,365 ) (51,354 ) Long-term debt less current maturities $ 239,042 $ 173,331 |
Computation of Secured Leverage Ratio to EBITDA | Fiscal Quarter Secured Leverage Ratio December 31, 2017 5.75:1.00 March 31, 2018 5.75:1.00 June 30, 2018 5.50:1.00 September 30, 2018 5.50:1.00 December 31, 2018 5.25:1.00 March 31, 2019 5.25:1.00 June 30, 2019 5.00:1.00 September 30, 2019 5.00:1.00 December 31, 2019 4.75:1.00 March 31, 2020 4.75:1.00 June 30, 2020 and each Fiscal Quarter thereafter 4.50:1.00 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
STOCK-BASED COMPENSATION [Abstract] | |
Changes in Restricted Stock | Changes in restricted stock for the nine months ended September 30, 2017 were as follows: Number of Shares Weighted Average Grant Price Non-vested at December 31, 2016 143,380 $ 26.76 Granted 18,672 $ 34.07 Forfeited (298 ) $ 59.60 Vested (79,853 ) $ 25.14 Non-vested at September 30, 2017 81,901 $ 29.88 |
EARNINGS PER SHARE DATA (Tables
EARNINGS PER SHARE DATA (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
EARNINGS PER SHARE DATA [Abstract] | |
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, 2017 2016 2017 2016 Basic: Weighted average shares outstanding 17,394 14,600 17,402 14,529 Net income attributable to DXP Enterprises, Inc. $ 2,966 $ 263 $ 10,234 $ 321 Convertible preferred stock dividend 23 23 68 68 Net income attributable to common shareholders $ 2,943 $ 240 $ 10,166 $ 253 Per share amount $ 0.17 $ 0.02 $ 0.58 $ 0.02 Diluted: Weighted average shares outstanding 17,394 14,600 17,402 14,529 Assumed conversion of convertible preferred stock 840 840 840 840 Total dilutive shares 18,234 15,440 18,242 15,369 Net income attributable to common shareholders $ 2,943 $ 240 $ 10,166 $ 253 Convertible preferred stock dividend 23 23 68 68 Net income attributable to DXP Enterprises, Inc. for diluted earnings per share $ 2,966 $ 263 $ 10,234 $ 321 Per share amount $ 0.16 $ 0.02 $ 0.56 $ 0.02 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
SEGMENT REPORTING [Abstract] | |
Segment Reporting Financial Information | The following table sets out financial information related to the Company's segments ( in thousands For the Three Months Ended September 30, 2017 2016 SC IPS SCS Total SC IPS SCS Total Sales $ 160,863 $ 51,027 $ 40,040 $ 251,930 $ 152,018 $ 39,830 $ 38,177 $ 230,025 Amortization 2,262 1,803 271 4,336 2,292 1,956 271 4,519 Income (loss) from operations 13,288 35 3,711 17,034 11,053 (326 ) 3,658 14,385 Income from operations, excluding amortization $ 15,550 $ 1,838 $ 3,982 $ 21,370 $ 13,345 $ 1,630 $ 3,929 $ 18,904 For the Nine Months Ended September 30, 2017 2016 SC IPS SCS Total SC IPS SCS Total Sales $ 474,324 $ 144,555 $ 122,276 $ 741,155 $ 481,352 $ 141,614 $ 116,835 $ 739,801 Amortization 6,738 5,393 812 12,943 6,871 5,874 812 13,557 Income from operations 40,570 1,710 10,946 53,226 28,608 1,549 10,799 40,956 Income from operations, excluding amortization $ 47,308 $ 7,103 $ 11,758 $ 66,169 $ 35,479 $ 7,423 $ 11,611 $ 54,513 |
Reconciliation of Operating Income for Reportable Segments to Consolidated Income before Taxes | The following table presents reconciliations of operating income for reportable segments to the consolidated income before taxes ( in thousands Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Operating income for reportable segments, excluding amortization $ 21,370 $ 18,904 $ 66,169 $ 54,513 Adjustment for: Amortization of intangible assets 4,336 4,519 12,943 13,557 Corporate expense 10,524 9,452 28,223 29,176 Income from operations 6,510 4,933 25,003 11,780 Interest expense 4,928 4,338 12,573 11,698 Other income, net (153 ) (251 ) (324 ) (397 ) Income before income taxes $ 1,735 $ 846 $ 12,754 $ 479 |
THE COMPANY (Details)
THE COMPANY (Details) | 9 Months Ended |
Sep. 30, 2017Segment | |
THE COMPANY [Abstract] | |
Number of segments | 3 |
SUMMARY OF SIGNIFICANT ACCOUN31
SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Variable Interest Entity [Line Items] | |||||||
Ownership percentage in VIE | 47.50% | ||||||
Assets of VIE | $ 5,400 | $ 5,200 | $ 5,400 | $ 5,200 | |||
Increase cost of sales from consolidation of the VIE | 300 | $ 200 | 700 | $ 800 | |||
Increase in selling, general and administrative expense | 300 | 58 | 800 | 200 | |||
Income tax benefit of VIE | 33 | 50 | 219 | 130 | |||
Equity method investment | 0 | $ 0 | $ 4,000 | 0 | $ 3,214 | ||
Distributions received from investments | 4,000 | ||||||
Receivable related to return from equity method investment | 200 | $ 200 | |||||
Former Executive Officers and Other Employees of DXP [Member] | |||||||
Variable Interest Entity [Line Items] | |||||||
Ownership percentage in VIE | 52.50% | ||||||
Property and Equipment [Member] | |||||||
Variable Interest Entity [Line Items] | |||||||
Assets of VIE | $ 4,900 | $ 5,200 | $ 4,900 | $ 5,200 |
RECENT ACCOUNTING PRONOUNCEME32
RECENT ACCOUNTING PRONOUNCEMENTS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Income tax benefit | $ (1,176) | $ 664 | $ 2,880 | $ 459 | |
Income tax benefit recognized as an operating activity | 0 | 619 | |||
Income tax expense recognized as a financing activity | 0 | (619) | |||
Non-current deferred income tax liabilities | 12,102 | 12,102 | $ 9,513 | ||
Cash classified to restricted cash | 3,614 | 3,614 | 0 | ||
ASU 2016-09 [Member] | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Income tax benefit | (200) | (300) | |||
Income tax benefit recognized as an operating activity | 300 | ||||
Income tax expense recognized as a financing activity | 600 | $ 200 | |||
ASU 2015-17 [Member] | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Non-current deferred income tax liabilities | $ 9,513 | ||||
ASU 2016-18 [Member] | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Cash classified to restricted cash | $ 3,600 | $ 3,600 |
INVENTORIES, NET (Details)
INVENTORIES, NET (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
INVENTORIES, NET [Abstract] | ||
Finished goods | $ 75,213 | $ 74,269 |
Work in progress | 12,507 | 9,430 |
Inventories, net | $ 87,720 | $ 83,699 |
COSTS AND ESTIMATED PROFITS O34
COSTS AND ESTIMATED PROFITS ON UNCOMPLETED CONTRACTS (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Schedule of costs and estimated earnings on uncompleted contracts [Abstract] | ||
Costs incurred on uncompleted contracts | $ 31,584 | $ 25,214 |
Estimated profits, thereon | 3,097 | 6,274 |
Total | 34,681 | 31,488 |
Less: billings to date | 13,530 | 15,864 |
Net | 21,151 | 15,624 |
Schedule of Costs and Estimated Earnings on Uncompleted Contracts Included in Condensed Consolidated Balance Sheets [Abstract] | ||
Costs and estimated profits in excess of billings on uncompleted contracts | 24,191 | 18,421 |
Billings in excess of costs and estimated profits on uncompleted contracts | (3,032) | (2,813) |
Translation adjustment | (8) | 16 |
Net | $ 21,151 | $ 15,624 |
PROPERTY AND EQUIPMENT, NET (De
PROPERTY AND EQUIPMENT, NET (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Property, Plant and Equipment [Line Items] | ||
Less - Accumulated depreciation | $ (59,647) | $ (52,582) |
Total property and equipment, net | 55,703 | 60,807 |
Land [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 2,345 | 2,346 |
Buildings and Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 16,668 | 16,259 |
Furniture, Fixtures and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 96,337 | $ 94,784 |
GOODWILL AND OTHER INTANGIBLE36
GOODWILL AND OTHER INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Goodwill [Roll Forward] | ||
Balance at beginning of period | $ 187,591 | |
Translation adjustment | 0 | |
Balance at end of period | 187,591 | |
Other Intangibles Assets [Roll Forward] | ||
Balance at beginning of period | 94,831 | |
Translation adjustment | 1,157 | |
Amortization | (12,943) | $ (13,557) |
Balance at end of period | 83,045 | |
Total Goodwill and Intangible Assets [Roll Forward] | ||
Balance at beginning of period | 282,422 | |
Translation adjustment | 1,157 | |
Amortization | (12,943) | $ (13,557) |
Balance at end of period | $ 270,636 |
GOODWILL AND OTHER INTANGIBLE37
GOODWILL AND OTHER INTANGIBLE ASSETS, Goodwill Balance by Reportable Segment (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Goodwill [Line Items] | ||
Goodwill | $ 187,591 | $ 187,591 |
Service Centers [Member] | ||
Goodwill [Line Items] | ||
Goodwill | 154,473 | 154,473 |
Innovative Pumping Solutions [Member] | ||
Goodwill [Line Items] | ||
Goodwill | 15,980 | 15,980 |
Supply Chain Services [Member] | ||
Goodwill [Line Items] | ||
Goodwill | $ 17,138 | $ 17,138 |
GOODWILL AND OTHER INTANGIBLE38
GOODWILL AND OTHER INTANGIBLE ASSETS, Amortizable Other Intangible Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | $ 163,150 | $ 164,858 |
Accumulated amortization | (80,105) | (70,027) |
Carrying amount, net | 83,045 | 94,831 |
Customer Relationships [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | 162,201 | 163,022 |
Accumulated amortization | (79,315) | (68,446) |
Carrying amount, net | 82,886 | 94,576 |
Non-Compete Agreements [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | 949 | 1,836 |
Accumulated amortization | (790) | (1,581) |
Carrying amount, net | $ 159 | $ 255 |
LONG-TERM DEBT (Details)
LONG-TERM DEBT (Details) $ in Thousands | Aug. 29, 2017USD ($) | Sep. 30, 2017USD ($) | Dec. 31, 2016USD ($) |
Borrowings [Abstract] | |||
Long-term debt | $ 242,407 | $ 224,685 | |
Less unamortized debt issuance costs | (10,531) | (992) | |
Less: Current portion | (3,365) | (51,354) | |
Long-term debt less current maturities | 239,042 | 173,331 | |
ABL Revolver [Member] | |||
Borrowings [Abstract] | |||
Long-term debt | $ 0 | 0 | |
Secured Leverage Ratio [Abstract] | |||
Debt instrument term | 5 years | ||
Debt instrument face amount | $ 85,000 | ||
Maturity date | Aug. 29, 2022 | ||
Incremental increase in term loan | 50,000 | ||
ABL Revolver [Member] | Minimum [Member] | |||
Secured Leverage Ratio [Abstract] | |||
Incremental increase in term loan | $ 10,000 | ||
Commitment fee | 0.25% | ||
ABL Revolver [Member] | Maximum [Member] | |||
Secured Leverage Ratio [Abstract] | |||
Commitment fee | 0.375% | ||
ABL Revolver [Member] | LIBOR [Member] | Minimum [Member] | |||
Secured Leverage Ratio [Abstract] | |||
Basis spread on base rate | 1.25% | ||
ABL Revolver [Member] | LIBOR [Member] | Maximum [Member] | |||
Secured Leverage Ratio [Abstract] | |||
Basis spread on base rate | 1.75% | ||
ABL Revolver [Member] | CDOR [Member] | Minimum [Member] | |||
Secured Leverage Ratio [Abstract] | |||
Basis spread on base rate | 1.25% | ||
ABL Revolver [Member] | CDOR [Member] | Maximum [Member] | |||
Secured Leverage Ratio [Abstract] | |||
Basis spread on base rate | 1.75% | ||
ABL Revolver [Member] | Prime Rate [Member] | Minimum [Member] | |||
Secured Leverage Ratio [Abstract] | |||
Basis spread on base rate | 0.25% | ||
ABL Revolver [Member] | Prime Rate [Member] | Maximum [Member] | |||
Secured Leverage Ratio [Abstract] | |||
Basis spread on base rate | 0.75% | ||
ABL Revolver [Member] | Base Rate [Member] | CANADA | Minimum [Member] | |||
Secured Leverage Ratio [Abstract] | |||
Basis spread on base rate | 0.25% | ||
ABL Revolver [Member] | Base Rate [Member] | CANADA | Maximum [Member] | |||
Secured Leverage Ratio [Abstract] | |||
Basis spread on base rate | 0.75% | ||
Term Loan B [Member] | |||
Borrowings [Abstract] | |||
Long-term debt | $ 250,000 | 0 | |
Secured Leverage Ratio [Abstract] | |||
December 31, 2017 | 5.75% | ||
March 31, 2018 | 5.75% | ||
June 30, 2018 | 5.50% | ||
September 30, 2018 | 5.50% | ||
December 31, 2018 | 5.25% | ||
March 31, 2019 | 5.25% | ||
June 30, 2019 | 5.00% | ||
September 30, 2019 | 5.00% | ||
December 31, 2019 | 4.75% | ||
March 31, 2020 | 4.75% | ||
June 30, 2020 and each Fiscal Quarter thereafter | 4.50% | ||
Secured Leverage Ratio | 3.61% | ||
Debt instrument term | 6 years | ||
Debt instrument face amount | $ 250,000 | ||
Amortization in quarterly installments | 0.25% | ||
Maturity date | Aug. 31, 2023 | ||
Incremental increase in term loan | $ 30,000 | ||
Percentage of excess cash flow | 50.00% | ||
Reduction in percentage of excess cash flow, condition one | 25.00% | ||
Debt instrument leverage ratio, condition one | 3 | ||
Reduction in percentage of excess cash flow, condition two | 0.00% | ||
Debt instrument leverage ratio, condition two | 2.50 | ||
Interest rate | 6.70% | ||
Term Loan B [Member] | Minimum [Member] | |||
Secured Leverage Ratio [Abstract] | |||
Incremental increase in term loan | $ 10,000 | ||
Term Loan B [Member] | Maximum [Member] | |||
Secured Leverage Ratio [Abstract] | |||
Secured debt covenant amount net of restricted cash | $ 30,000 | ||
Debt instrument secured leverage ratio | 3.60 | ||
Fixed charge coverage ratio | 1 | ||
Line of Credit [Member] | |||
Borrowings [Abstract] | |||
Long-term debt | 0 | 147,600 | |
Term Loan [Member] | |||
Borrowings [Abstract] | |||
Long-term debt | 0 | 74,500 | |
Promissory Note Payable [Member] | |||
Borrowings [Abstract] | |||
Long-term debt | $ 2,938 | $ 3,577 | |
Secured Leverage Ratio [Abstract] | |||
Interest rate | 2.90% |
INCOME TAXES (Details)
INCOME TAXES (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
INCOME TAXES [Abstract] | ||||
Effective income tax rate from continuing operations | 67.80% | 78.50% | 22.60% | 95.80% |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) - USD ($) $ / shares in Units, $ in Thousands | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Weighted Average Grant Price [Roll Forward] | |||
Stock compensation expense | $ 1,392 | $ 1,944 | |
Restricted Stock [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Percentages of vesting for one year | 100.00% | ||
Percentages of vesting for three years | 33.30% | ||
Percentages of vesting for five years | 20.00% | ||
Percentages of vesting for ten years | 10.00% | ||
Award vesting period | 1 year | ||
Number of shares available for future grants (in shares) | 401,223 | ||
Restricted Stock [Roll Forward] | |||
Non-vested, beginning balance (in shares) | 143,380 | ||
Granted (in shares) | 18,672 | ||
Forfeited (in shares) | (298) | ||
Vested (in shares) | (79,853) | ||
Non-vested, ending balance (in shares) | 81,901 | ||
Weighted Average Grant Price [Roll Forward] | |||
Non-vested, beginning balance (in dollars per share) | $ 26.76 | ||
Granted (in dollars per share) | 34.07 | ||
Forfeited (in dollars per share) | 59.60 | ||
Vested (in dollars per share) | 25.14 | ||
Non-vested, ending balance (in dollars per share) | $ 29.88 | ||
Stock compensation expense | $ 1,400 | 1,900 | |
Related income tax benefits recognized | 600 | $ 600 | |
Unrecognized compensation expense | $ 1,900 | $ 2,700 | |
Compensation cost not yet recognized, period for recognition | 17 months 12 days |
EARNINGS PER SHARE DATA (Detail
EARNINGS PER SHARE DATA (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Basic [Abstract] | ||||
Weighted average shares outstanding (in shares) | 17,394 | 14,600 | 17,402 | 14,529 |
Net income attributable to DXP Enterprises, Inc. | $ 2,966 | $ 263 | $ 10,234 | $ 321 |
Convertible preferred stock dividend | 23 | 23 | 68 | 68 |
Net income attributable to common shareholders | $ 2,943 | $ 240 | $ 10,166 | $ 253 |
Per share amount (in dollars per share) | $ 0.17 | $ 0.02 | $ 0.58 | $ 0.02 |
Diluted [Abstract] | ||||
Weighted average shares outstanding (in shares) | 17,394 | 14,600 | 17,402 | 14,529 |
Assumed conversion of convertible preferred stock (in shares) | 840 | 840 | 840 | 840 |
Total dilutive shares (in shares) | 18,234 | 15,440 | 18,242 | 15,369 |
Net income attributable to common shareholders | $ 2,943 | $ 240 | $ 10,166 | $ 253 |
Convertible preferred stock dividend | 23 | 23 | 68 | 68 |
Net income attributable to DXP Enterprises, Inc. for diluted earnings per share | $ 2,966 | $ 263 | $ 10,234 | $ 321 |
Per share amount (in dollars per share) | $ 0.16 | $ 0.02 | $ 0.56 | $ 0.02 |
SEGMENT REPORTING, Business Seg
SEGMENT REPORTING, Business Segmented Financial Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Segment Reporting Information [Line Items] | ||||
Sales | $ 251,930 | $ 230,025 | $ 741,155 | $ 739,801 |
Income (loss) from operations | 6,510 | 4,933 | 25,003 | 11,780 |
Reportable Segment [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 251,930 | 230,025 | 741,155 | 739,801 |
Amortization | 4,336 | 4,519 | 12,943 | 13,557 |
Income (loss) from operations | 17,034 | 14,385 | 53,226 | 40,956 |
Operating income, excluding amortization | 21,370 | 18,904 | 66,169 | 54,513 |
Reportable Segment [Member] | Service Centers [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 160,863 | 152,018 | 474,324 | 481,352 |
Amortization | 2,262 | 2,292 | 6,738 | 6,871 |
Income (loss) from operations | 13,288 | 11,053 | 40,570 | 28,608 |
Operating income, excluding amortization | 15,550 | 13,345 | 47,308 | 35,479 |
Reportable Segment [Member] | Innovative Pumping Solutions [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 51,027 | 39,830 | 144,555 | 141,614 |
Amortization | 1,803 | 1,956 | 5,393 | 5,874 |
Income (loss) from operations | 35 | (326) | 1,710 | 1,549 |
Operating income, excluding amortization | 1,838 | 1,630 | 7,103 | 7,423 |
Reportable Segment [Member] | Supply Chain Services [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 40,040 | 38,177 | 122,276 | 116,835 |
Amortization | 271 | 271 | 812 | 812 |
Income (loss) from operations | 3,711 | 3,658 | 10,946 | 10,799 |
Operating income, excluding amortization | $ 3,982 | $ 3,929 | $ 11,758 | $ 11,611 |
SEGMENT REPORTING, Reconciliati
SEGMENT REPORTING, Reconciliation of operating Income to Consolidated Income (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Adjustment for [Abstract] | ||||
Amortization of intangible assets | $ 12,943 | $ 13,557 | ||
Income from operations | $ 6,510 | $ 4,933 | 25,003 | 11,780 |
Interest expense | 4,928 | 4,338 | 12,573 | 11,698 |
Other income, net | (153) | (251) | (324) | (397) |
Income before provision for income taxes | 1,735 | 846 | 12,754 | 479 |
Reportable Segment [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Operating income for reportable segments, excluding amortization | 21,370 | 18,904 | 66,169 | 54,513 |
Adjustment for [Abstract] | ||||
Income from operations | 17,034 | 14,385 | 53,226 | 40,956 |
Reportable Segment [Member] | Service Centers [Member] | ||||
Adjustment for [Abstract] | ||||
Income from operations | 13,288 | 11,053 | 40,570 | 28,608 |
Reportable Segment [Member] | Innovative Pumping Solutions [Member] | ||||
Adjustment for [Abstract] | ||||
Income from operations | 35 | (326) | 1,710 | 1,549 |
Reportable Segment [Member] | Supply Chain Services [Member] | ||||
Adjustment for [Abstract] | ||||
Income from operations | 3,711 | 3,658 | 10,946 | 10,799 |
Segment Reconciling Items [Member] | ||||
Adjustment for [Abstract] | ||||
Amortization of intangible assets | 4,336 | 4,519 | 12,943 | 13,557 |
Corporate expense | $ 10,524 | $ 9,452 | $ 28,223 | $ 29,176 |