What changed in this filing

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Item 1. Business

2022-04-05 compared with 2021-03-18 · 86 added, 63 removed, 284 unchanged (34% of the section changed)

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was incorporated in Texas in 1996 to be the successor to SEPCO Industries, Inc.

Since our predecessor company was founded, we have primarily been engaged in the business of distributing maintenance, repair and operating ("MRO") products, equipment and service to customers in a variety of end markets including the general industrial, energy, food & beverage, chemical, transportation, water and wastewater.

The Company is organized into three business segments:

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Our total sales have increased from $125 million in 1996 to $1.1 billion in 2021 through a combination of internal growth and business acquisitions.

At December 31, 2020, we operated from 168 locations which included 35 states in the U.S., nine provinces in Canada and one location in Dubai serving customers engaged in a variety of end markets.

At December 31, 2021, we operated from 170 locations which included 35 states in the U.S., nine provinces in Canada and one location in Dubai serving customers engaged in a variety of end markets as noted above.

We have grown sales and profitability by adding additional products, services, and locations and becoming customer driven experts in maintenance, repair and operating solutions.

Our principal executive office is located at 5301 Hollister St., Houston, Texas 77040, and our telephone number is (713) 996-4700.

Our website address on the internet is www.dxpe.com and emails may be sent to info@dxpe.com.

Our website address is www.dxpe.com and emails may be sent to info@dxpe.com.

The reference to our website address does not constitute incorporation by reference of the information contained on the website and such information should not be considered part of this report.

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We believe we have increased our competitive advantage through our traditional fabrication of integrated system pump packages and integrated supply programs, which are designed to address our customers’ specific product and procurement needs.

We offer our customers various options for the integration of their supply needs, ranging from serving as a single source of supply for all our specific lines of products and product categories to offering a fully integrated supply package in which we

assume procurement and management functions, which can include ownership of inventory, at the customer's location.

We offer our customers various options for the integration of their supply needs, ranging from serving as a single source

of supply for all our specific lines of products and product categories to offering a fully integrated supply package in which we assume procurement and management functions, which can include ownership of inventory, at the customer's location.

Our approach to integrated supply allows us to design a program that best fits the needs of the customer.

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% of Sales End Markets Locations Employees

SC $662.6 65.9% Oil & Gas, Food & Beverage, General Industrial, Chemical & Petrochemical, Transportation, Aerospace 154 service centers, 4 distribution centers

IPS $188.0 18.7% Oil & Gas, Mining, Petrochemical, & Utilities 10 fabrication facilities

SC $816.5 73.3% General Industrial, Oil & Gas, Food & Beverage, Water & Wastewater, Chemical & Petrochemical, Transportation, Aerospace 148 service centers, 4 distribution centers

IPS $139.6 12.5% Oil & Gas, Mining, Petrochemical, Water & Wastewater and Utilities 16 fabrication facilities, two wastewater locations

SCS $157.8 14.2% Food & Beverage, Transportation, Oil & Gas, General Industrial & Chemical 82 customers facilities'

Service Centers

The Service Centers are engaged in providing MRO products, equipment and services, including technical expertise and logistics capabilities, to energy and industrial customers with the ability to provide same day delivery.

The Service Centers are engaged in providing MRO products, equipment and services, including technical expertise and logistics capabilities, to a variety of customers serving varied end markets with the ability to provide same day delivery.

We offer our customers a single source of supply on an efficient and competitive basis by being a first-tier distributor that can purchase products directly from manufacturers.

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DXP’s Innovative Pumping Solutions (IPS) segment provides integrated, custom pump skid packages, pump remanufacturing and manufactures branded private label pumps to meet the capital equipment needs of our global customer base.

Additionally, our IPS segment provides project solutions and capital equipment to the water and wastewater treatment markets including potable water, bio-solid and residual management and wastewater treatment.

Our IPS segment provides a single source for engineering, systems design and fabrication for unique customer specifications.

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DXP’s fabrication facilities provide convenient technical support and pump repair services.

The facilities contain state of the art equipment to provide the technical expertise our customers require including, but not limited to, the following:

• Structural welding

• Pipe welding

• Custom skid assembly

• Custom coatings

• Hydrostatic pressure testing

• Mechanical string testing

Examples of our innovative pump packages include, but are not limited to:

• Diesel and electric driven firewater packages

• Diesel and electric driven fire and water packages

• Pipeline booster packages

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• Variety of packages to meet customer required industry specifications such as API, ANSI and NFPA

At December 31, 2020, the Innovative Pumping Solutions segment operated out of 10 facilities, eight of which are located in the United States and two in Canada.

At December 31, 2021, the Innovative Pumping Solutions segment operated out of 18 facilities, 16 of which are located in the United States and two in Canada.

All of the IPS segment’s long-lived assets are located in the U.S.

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and customized reporting.

Our mission is to help our customers become more competitive by reducing their indirect material costs and order cycle time by increasing productivity and by creating enterprise-wide inventory and procurement visibility and control.

Our mission is to help our customers become more competitive by reducing their indirect material costs

and order cycle time by increasing productivity and by creating enterprise-wide inventory and procurement visibility and control.

DXP has developed assessment tools and master plan templates aimed at taking cost out of supply chain processes, streamlining operations and boosting productivity.

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Unlike many other distributors who buy products from second-tier sources, DXP takes customers to the source of the products they need.

At December 31, 2020, the Supply Chain Services segment operated supply chain installations in 79 of our customers’ facilities.

At December 31, 2021, the SCS segment operated supply chain installations in 82 of our customers’ facilities.

All of the SCS segment’s long-lived assets are in the U.S.

and the majority of the SCS segment’s 2021 revenues were recognized in the U.S.

At December 31, 2020, the Supply Chain Services segment had approximately 347 employees, all of whom were full-time.

At December 31, 2021, the SCS segment had approximately 355 employees, all of whom were full-time.

Most industrial customers currently purchase their MRO products through local or national distribution companies that are focused on single or unique product categories.

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• Bearings & Power Transmission .

Our bearing products include several types of mounted and un-mounted bearings for a variety of applications.

Our bearing products include several types of mounted and unmounted bearings for a variety of applications.

The power transmission products we distribute include speed reducers, flexible-coupling drives, chain drives, sprockets, gears, conveyors, clutches, brakes and hoses.

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Recent Acquisitions

A key component of our growth strategy includes effecting acquisitions of businesses with complementary or desirable product lines, locations or customers.

A key component of our growth strategy includes acquiring businesses with complementary or desirable product lines, locations or customers.

Since 2004, we have completed 44 acquisitions across our three business segments.

The following briefly describes the Company’s acquisition activity for the two years ended December 31, 2021.

On September 20, 2021, the Company completed the acquisition of Premier Water LLC (“Premier”).

Premier is a leading distributor and provider of products and services exclusively focused on serving the water and wastewater treatment markets primarily in North and South Carolina.

The Company paid approximately $5.8 million in cash and stock subject to normal transaction adjustments customary for a transaction of this size and nature.

On July 1, 2021, the Company completed the acquisition of Process Machinery, Inc.

(“PMI”), a leading distributor of pumps, mechanical seals, tank, filters and related process equipment that focuses on serving the chemical, power, pulp & paper, mining, metals and food processing industries.

The Company paid approximately $9.6 million in cash, stock and future consideration subject to normal transaction adjustments customary for a transaction of this size and nature.

See Note 17 - Business Acquis itions for further detail on additional potential consideration.

On April 30, 2021, the Company completed the acquisition of Carter & Verplanck, LLC (“CVI”), a distributor of products and services exclusively focused on serving the water and wastewater markets.

The acquisition of CVI was funded with cash on hand as well as issuing DXP's common stock.

The Company paid approximately $49.7 million in cash and stock subject to normal transaction adjustments customary for a transaction of this size and nature.

A majority of CVI's sales are project-based work under the percentage-of-completion accounting model.

As a result, CVI has been included in the IPS segment.

On December 31, 2020, the Company completed the acquisition of Total Equipment Company, Inc.

(“TEC”), a distributor of industrial and commercial pumps and air compressors focused on serving multiple end markets including steel, chemicals, water / wastewater, oil & gas and general industrial markets.

The Company paid approximately $64.7 million in cash and stock.

The Company paid approximately $64.7 million in cash and stock, subject to normal transaction adjustments customary for a transaction of this size and nature.

On December 31, 2020, the Company completed the acquisition of APO Pumps & Compressors, LLC (“APO”), a distributor of industrial and commercial pumps and air compressors focused on serving multiple end markets including the water / wastewater, steel, food & beverage, and general industrial markets.

The Company paid approximately $38.3 million in cash and stock.

The Company paid approximately $53.0 million in cash and stock, subject to normal transaction adjustments customary for a transaction of this size and nature.

On December 31, 2020, the Company completed the acquisition of Pumping Solutions, Inc., A California Corporation (“Pumping Solutions”), a distributor of industrial and commercial pumps and process equipment focused on serving multiple end markets including the water / wastewater, chemical, food & beverage, and general industrial markets.

The Company paid approximately $21.0 million in cash and stock.

The Company paid

approximately $21.0 million in cash and stock, subject to normal transaction adjustments customary for a transaction of this size and nature.

On December 31, 2020, the Company completed the acquisition of Corporate Equipment Company, LLC (“CEC”), a distributor of industrial and commercial pumps and air compressors focused on serving multiple end markets including the water / wastewater, steel, food & beverage, and general industrial markets.

The Company paid approximately $4.5 million in cash and stock.

The Company paid approximately $3.3 million in cash and stock, subject to normal transaction adjustments customary for a transaction of this size and nature.

On February 1, 2020, the Company completed the acquisition of substantially all of the assets of Turbo Machinery Repair, Inc (“Turbo”), a pump and industrial equipment repair, maintenance, machining and labor services company.

The Company paid approximately $3.2 million in cash.

The Company paid approximately $3.2 million in cash, subject to normal transaction adjustments customary for a transaction of this size and nature.

On January 1, 2020, the Company completed the acquisition of Pumping Systems, Inc.

(“PSI”), a distributor of pumps, systems and related services.

The Company paid approximately $13.0 million in cash and stock.

On January 1, 2018, the Company completed the acquisition of Application Specialties, Inc.

(“ASI”), a distributor of cutting tools, abrasives, coolants and machine shop supplies.

DXP paid approximately $11.7 million in cash and stock plus an additional earn-out provision over three years for up to $4.6 million.

The Company paid approximately $13.0 million in cash and stock, subject to normal transaction adjustments customary for a transaction of this size and nature.

Our business is highly competitive.

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In the event of such a discharge, we could be held liable for any damages that result, and any such liability could have a material adverse effect on us.

We are not currently aware of any situation or condition that we believe is likely to have a material adverse effect on our results of operations or financial condition.

We are not currently aware of any environmental situation or violations of government regulations that we believe are likely to have a material adverse effect on our results of operations or financial condition.

Human Capital

DXP employed 2,550 people as of December 31, 2020 with approximately 2,309 people located in the United States, 234 people located in Canada and the remainder in other countries where the Company's business operates.

DXP employed 2,490 people as of December 31, 2021 with approximately 2,259 people located in the United States, 231 people located in Canada and other countries where the Company's business operates.

The Company is continually investing in its workforce to further talent development, increase employee safety, drive a strong workplace culture, improve compensation and benefits and diversity and inclusion to support our employees’ well-being, and foster their growth and development.

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The Company considers its employee relations to be excellent.

Headcount by segment is as follows:

Business Segment Employees

Service Centers 1,605

Innovative Pumping Solutions 327

Supply Chain Services 347

Headcount by segment and country are as follows:

Business Segment Employees Country Employees

Service Centers 1,577 United States 2,259

Innovative Pumping Solutions 286 Canada 224

Supply Chain Services 355 Other 7

Corporate 272

Total Employees 2,550

Total Employees 2,490 Total Employees 2,490

We believe our employees are key to achieving our business objectives.

Throughout the COVID-19 pandemic crisis, we have continued to operate our business despite the challenges that arise from closing offices and operating our branch locations.

Our use of technology and third party conferencing platforms have enabled our office employees to work from home, performing their job functions with little to no loss of productivity.

Throughout the COVID-19 pandemic crisis, we continued to operate our business despite the challenges that arose from closing offices and operating our branch locations.

Our use of technology and third party conferencing platforms enabled our office employees to work from home, performing their job functions with little to no loss of productivity.

We required our employees to work from home as a result of governmental stay-at-home orders and, in many cases, in advance of those orders for the health and safety of our employees.

For the most part, our warehouses and regional distribution centers have remained open.

Under various shelter-in place orders by national, state, provincial and local governments, we have been exempted as an “essential” business as the products we sell are necessary for the maintenance and functioning of the energy infrastructure and other industries.

We have taken measures to safeguard the health and welfare of our employees.

As various governmental isolation orders are lifted or phased out, we are reviewing our operational plans to continue operating our business while addressing the health and safety of our employees.

For the most part, our warehouses and regional distribution centers remained open.

Under various shelter-in place orders by national, state, provincial and local governments, we were exempted as an “essential” business as the products we sell are necessary for the maintenance and functioning of the energy infrastructure and other industries.

We took measures to safeguard the health and welfare of our employees.

As various governmental isolation orders were lifted or phased out, we modified our operational plans to continue operating our business while addressing the health and safety of our employees.

Executive Officers

The following is a list of DXP’s executive officers, their age, positions, and a description of each officer’s business experience as of March 18, 2021.

The following is a list of DXP’s executive officers, their age, positions, and a description of each officer’s business experience as of April 5, 2022.

All of our executive officers hold office at the pleasure of DXP’s Board of Directors.

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Little 70 Chairman of the Board, President and Chief Executive Officer

Kent Yee 45 Senior Vice President/Chief Financial Officer

Kent Yee 46 Senior Vice President/Chief Financial Officer/Secretary

Nick Little 40 Senior Vice President/Chief Operating Officer

Chris Gregory 47 Senior Vice President/Chief Information Technology Officer

Paz Maestas 42 Senior Vice President/Chief Marketing & Technology Officer

Gene Padgett 51 Senior Vice President/Chief Accounting Officer

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Todd Hamlin 50 Senior Vice President/Service Centers

Chris Gregory 46 Senior Vice President/Information Technology

Little has served as Chairman of the Board, President and Chief Executive Officer of DXP since its organization in 1996 and also has held these positions with SEPCO Industries, Inc., predecessor to the Company (“SEPCO”), since he acquired a controlling interest in SEPCO in 1986.

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He also provides leadership skills and knowledge of our local community and business environment, which he has gained through his long career with DXP and its predecessor companies.

Yee was appointed Senior Vice President/Chief Financial Officer in June 2017.

Yee was appointed Senior Vice President/Chief Financial Officer/Secretary in June 2017.

Currently, Mr.

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Yee was a member of The Home Depot’s Strategic Business Development Group with a primary focus on acquisition activity for HD Supply.

Yee was also an Associate in the Global Syndicated Finance Group at JPMorgan Chase.

Yee was also an Associate in the Global Syndicated Finance Group

at JPMorgan Chase.

He has executed over 48 transactions including more than $1.5 billion in M&A and $3.4 billion in financing transactions primarily for change of control deals and numerous industrial and distribution acquisition and sale assignments.

He holds a Bachelors of Arts in Urban Planning from Morehouse College and an MBA from Harvard University Graduate School of Business.

Nick Little .

Little was appointed Senior Vice President/Chief Operating Officer in January 2021.

Little began his career with DXP nearly twenty years ago as an application engineer.

During his tenure at DXP, Mr.

Little has held various roles of increasing responsibility including outside sales, Director of Operations and more recently as the Regional Vice President of Sales and Operations.

As Chief Operating Officer, Mr.

Little is responsible for the execution of the strategic direction of the Company and oversees sales, operations and inventory management & procurement of DXP.

He holds a Bachelor of Business Administration in Finance from Baylor University.

Chris Gregory .

Gregory was appointed Senior Vice President and Chief Information Officer in March of 2018.

Gregory joined the Company in August 2006.

From December 2014 until January 2018 he served as Vice President of IT Strategic Solutions.

Prior to serving as Vice President of IT Strategic Solutions he served in various roles, including application developer, database manager as well as leading the business intelligence and application development departments.

He holds a Bachelor of Business Administration and Computer Information Systems from the University of Houston and an MBA from The University of Texas at Austin, McCombs School of Business.

Paz Maestas .

Maestas was appointed Senior Vice President/Chief Marketing and Technology Officer in January 2021.

Maestas has been with DXP since 2002 and leads the Company's e-Commerce and Omni-Channel initiatives.

In his 20 years with DXP, he has served in various roles and most recently as Vice President of Marketing and Operations.

He holds a Bachelor of Science from the University of Texas at Austin.

Gene Padgett .

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Prior to Spectra Energy, he spent seven years with Duke Energy in various roles covering Corporate Accounting, Accounting Research and Policy and working as a divisional controller.

Padgett started his career at PricewaterhouseCoopers.

Vinson was elected Senior Vice President/Innovative Pumping Solutions in January 2006.

Padgett started his career at PricewaterhouseCoopers LLP.

Vinson was appointed Senior Vice President/Innovative Pumping Solutions in January 2006.

He served as Senior Vice President/Operations of DXP from October 2000 to December 2005.

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Vinson has served in various capacities with DXP since his employment in 1981.

Jeffery serves as Senior Vice President of Supply Chain Services, Marketing and Information Technology.

He oversees the strategic direction for the Supply Chain Services business unit while leveraging both Marketing and Information Technology to drive innovative business development initiatives for organizational growth and visibility.

Jeffery was appointed Senior Vice President of Supply Chain Services in May 2010.

He oversees the strategic direction for the Supply Chain Services business unit driving innovative business development initiatives for organizational growth and visibility.

He began his career with T.L.

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During his tenure with DXP, Mr.

Jeffery has served in various significant capacities including branch, area, regional and national sales management as well as sales, marketing and Service Center vice president roles.

Jeffery has served in various significant capacities including branch, area, regional and national sales management as well as sales, marketing, information technology and Service Center vice president roles.

He holds a Bachelor of Science in Industrial Distribution from Texas A&M University and is also a graduate of the Executive Business Program at Rice University.

Hamlin was elected Senior Vice President of DXP Service Centers in June of 2010.

Hamlin was appointed Senior Vice President of DXP Service Centers in June of 2010.

Hamlin joined the Company in 1995.

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Hamlin was elected to the Bearing Specialists Association’s Board of Directors.

Chris Gregory .

Gregory was elected Senior Vice President and Chief Information Officer in March of 2018.

Gregory joined the Company in August 2006.

From December 2014 until January 2018 he served as Vice President of IT Strategic Solutions.

He holds a Bachelor of Business Administration and Computer Information Systems from the University of Houston and an MBA from The University of Texas at Austin, McCombs School of Business.

All officers of DXP hold office until the regular meeting of the board of directors following the 2022 Annual Meeting of Shareholders or until their respective successors are duly elected and qualified or their earlier resignation or removal.

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Our internet address is www.dxpe.com and the investor relations section of our website is located at ir.dxpe.com.

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended (the “Exchange Act”), are available free of charge through our Internet website ( www.dxpe.com ) as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed

or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended (the “Exchange Act”), are available free of charge through our Internet website ( www.dxpe.com ) as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with SEC at http://www.sec.gov.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business