What changed in this filing

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Item 1. Business

2023-04-17 compared with 2022-04-05 · 73 added, 70 removed, 300 unchanged (32% of the section changed)

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Founded in 1908, DXP Enterprises, Inc.

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

(together with our subsidiaries, hereinafter referred to as "DXP" or the "Company" or by the terms such as we, our, or us) 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.

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Service Centers ("SC"), Supply Chain Services ("SCS") and Innovative Pumping Solutions ("IPS").

Sales, operating income, and other financial information for 2021, 2020 and 2019, and identifiable assets at the close of such years for our business segments are presented in Note 21 – Segment and Geographical Reporting to the Consolidated Financial Statements in Item 8.

Sales, operating income, and other financial information for 2022, 2021 and 2020, and identifiable assets at the close of such years for our business segments are presented in Note 22 – Segment Reporting to the Consolidated Financial Statements in Item 8.

Financial Statements and Supplementary Data .

Our total sales have increased from $125 million in 1996 to $1.5 billion in 2022 through a combination of internal growth and business acquisitions.

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.

At December 31, 2022, we operated from 180 locations which included 37 states in the U.S., nine provinces in Canada and one location in Dubai serving customers engaged locations and becoming customer driven experts in maintenance, repair and operating solutions.

The following table shows, as of the end of the last 10 fiscal years, our consolidated sales;

the number of service centers, supply chain service sites, IPS facilities and the corresponding sales and average sales per business segment location:

($ in millions) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Sales $ 1,242 $ 1,500 $ 1,247 $ 962 $ 1,007 $ 1,216 $ 1,265 $ 1,005 $ 1,114 $ 1,481

SC locations 178 185 179 167 165 155 145 158 152 160

SC Sales $ 885 $ 988 $ 827 $ 621 $ 641 $ 750 $ 762 $ 663 $ 816 $ 1,009

Sales / SC location 5.0 5.3 4.6 3.7 3.9 4.8 5.3 4.2 5.4 6.3

SCS Customer Sites 62 74 69 67 67 83 89 79 82 95

SCS Sales $ 148 $ 164 $ 166 $ 154 $ 161 $ 174 $ 201 $ 155 $ 158 $ 240

SCS Sales / Site 2.4 2.2 2.4 2.3 2.4 2.1 2.3 2.0 1.9 2.5

IPS Facilities 10 12 12 11 11 11 10 10 18 20

IPS Sales $ 209 $ 348 $ 255 $ 187 $ 204 $ 292 $ 304 $ 188 $ 140 $ 231

IPS Sales / Facility 20.9 29.0 21.3 17.0 18.5 26.5 30.4 18.8 7.8 11.6

Total Locations 250 271 260 245 243 249 244 247 252 275

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

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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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In addition to the three business segments, our consolidated financial results include "Corporate and other expenses" which includes costs related to our centralized support functions, consisting, of accounting and finance, information technology, marketing, human resources, legal, inventory management & procurement and other support services and removes inter-company transactions.

The following table sets forth DXP’s sales by business segments as of December 31, 2021.

The following table sets forth the Company’s sales by business segments as of December 31, 2022.

See Results of Operations under Item 7.

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SC $1,009.4 68.2% General Industrial, Oil & Gas, Food & Beverage, Water & Wastewater, Chemical & Petrochemical, Transportation, Aerospace 156 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'

IPS $231.1 15.6% Oil & Gas, Mining, Petrochemical, Water & Wastewater and Utilities 16 fabrication facilities, 4 wastewater locations

SCS $240.4 16.2% Food & Beverage, Transportation, Oil & Gas, General Industrial & Chemical 95 customer facilities'

Service Centers

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Sales are directly solicited from customers by our sales force.

DXP Service Centers are stocked and staffed with knowledgeable sales associates and backed by a centralized customer service team of experienced industry professionals.

The Company's Service Centers are stocked and staffed with knowledgeable sales associates and backed by a centralized customer service team of experienced industry professionals.

At December 31, 2022, our Service Centers’ products and services were distributed from 156 service centers and 4 distribution centers.

DXP Service Centers provide a wide range of MRO products in the rotating equipment, bearing, power transmission, hose, fluid power, metal working, industrial supply and safety product and service categories.

The Company's Service Centers provide a wide range of MRO products in the rotating equipment, bearing, power transmission, hose, fluid power, metal working, industrial supply and safety product and service categories.

We currently serve as a first-tier distributor of more than 1,000,000 items of which more than 60,000 are stock keeping units (SKUs) for use primarily by customers engaged in the oil and gas, food and beverage, petrochemical, transportation and other general industrial industries.

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Innovative Pumping Solutions

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.

The Company'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.

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Sales are directly solicited from customers by our dedicated sales force.

DXP’s engineering staff can design a complete custom pump package to meet our customers’ project specifications.

The Company's engineering staff can design a complete custom pump package to meet our customers’ project specifications.

Drafting programs such as Solidworks and AutoCAD® allow our engineering team to verify the design and layout of packages with our customers prior to the start of fabrication.

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This process helps maximize the pump packages’ life and minimizes any impact to the environment.

With over 100 years of fabrication experience, DXP has acquired the technical expertise to ensure that our pumps and pump packages are built to meet the highest standards.

DXP utilizes manufacturer authorized equipment and manufacturer certified personnel.

With over 100 years of fabrication experience, the Company has acquired the technical expertise to ensure that our pumps and pump packages are built to meet the highest standards.

The Company utilizes manufacturer authorized equipment and manufacturer certified personnel.

Pump packages require MRO products and original equipment manufacturers’ (OEM) equipment such as pumps, motors, valves, and consumable products such as welding supplies.

DXP leverages its MRO product inventories and breadth of authorized products to lower the total cost and maintain the quality of our pump packages.

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

The Company leverages its MRO product inventories and breadth of authorized products to lower the total cost and maintain the quality of our pump packages.

The Company's fabrication facilities provide convenient technical support and pump repair services.

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

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Supply Chain Services

DXP’s Supply Chain Services (SCS) segment manages all or part of its customers’ supply chains, including procurement and inventory management.

The Company's Supply Chain Services (SCS) segment manages all or part of its customers’ supply chains, including procurement and inventory management.

The SCS segment enters into long-term contracts with its customers that can be canceled on little or no notice under certain circumstances.

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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.

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

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.

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

This multi-faceted approach allows us to manage the entire MRO products channel for maximum efficiency and optimal control, which ultimately provides our customers with a low-cost solution.

DXP takes a consultative approach to determine the strengths and opportunities for improvement within a customer’s MRO products supply chain.

The Company takes a consultative approach to determine the strengths and opportunities for improvement within a customer’s MRO products supply chain.

This assessment determines if and how we can best streamline operations, drive value within the procurement process, and increase control in storeroom management.

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It provides a more efficient way to manage the entire life cycle of pumping systems and rotating equipment.

DXP’s SmartSolutions programs listed above help customers to cut product costs, improve supply chain efficiencies and obtain expert technical support.

DXP represents manufacturers of up to 90% of all the maintenance, repair and operating products of our customers.

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

The Company's SmartSolutions programs listed above help customers to cut product costs, improve supply chain efficiencies and obtain expert technical support.

The Company represents manufacturers of up to 90% of all the maintenance, repair and operating products of our customers.

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

At December 31, 2022, the SCS segment operated supply chain installations in 95 of our customers’ facilities.

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We are authorized to distribute certain manufacturers' products only in specific geographic areas.

All of our oral or written distribution authorizations are subject to cancellation by the manufacturer, some upon little or no notice.

For the last three fiscal years, no manufacturer provided products that accounted for 10% or more of our revenues.

All of our distribution authorizations are subject to cancellation by the manufacturer, some upon little or no notice.

For the last three fiscal years, no manufacturer accounted for 10% or more of our revenues.

Over 90% of our business relates to sales of products.

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The Company has operations in the United States of America, Canada and Dubai.

Information regarding financial data by geographic areas is set forth in Note 21 - Segment and Geographical Reporting of the Notes to Consolidated Financial Statements.

Information regarding financial data by geographic areas is set forth in Note 22 - Segment Reporting of the Notes to Consolidated Financial Statements.

Recent Acquisitions

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Since 2004, we have completed 48 acquisitions across our three business segments.

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

The following briefly describes the Company’s acquisition activity for the years ended December 31, 2022 and December 31, 2021.

On September 1, 2022, the Company completed the acquisition of Sullivan Environmental Technologies, Inc.

("Sullivan").

Sullivan is a leading distributor for the municipal and industrial water and wastewater treatment industries in Ohio, Kentucky, and Indiana.

Sullivan is included within our IPS business segment.

Total consideration for the transaction was approximately $6.5 million, funded with a mixture of cash on hand of $4.6 million, the Company's common stock valued at approximately $0.9 million and contingent consideration of $1.0 million.

On May 2, 2022, the Company completed the acquisition of Cisco Air Systems, Inc.

Cisco is a leading distributor of air compressors and related products and services focused on serving the food and beverage, transportation and general industrial markets in the Northern California and Nevada territories.

Cisco is included within our SC business segment.

Total consideration for the transaction was approximately $52.3 million, funded with a mixture of cash on hand of $32 million, the Company's common stock valued at approximately $4.4 million and a draw down of approximately $11 million on the ABL and contingent consideration of $4.5 million.

On March 1, 2022, the Company completed the acquisition of Drydon Equipment, Inc.

("Drydon"), a distributor and manufacturers’ representative of pumps, valves, controls and process equipment focused on serving the water and wastewater industry in the Midwest.

The acquisition of Drydon was funded with cash on hand and an issuance of DXP's common stock.

The Company paid approximately $7.9 million, funded with a mixture of cash on hand of $4.9 million, the Company's common stock valued at approximately $441 thousand and contingent consideration of $2.6 million.

A majority of Drydon's sales are project-based work.

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

On March 1, 2022, the Company completed the acquisition of certain assets of Burlingame Engineers, Inc.

("Burlingame"), a provider of water and wastewater equipment in the industrial and municipal sectors.

Burlingame is included within our SC business segment.

The Company paid approximately $1.1 million in cash, the Company's common stock and contingent consideration.

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.

Premier is included within our IPS business segment.The Company paid approximately $5.8 million in cash and stock.

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.

PMI is included within our SC business segment.The Company paid approximately $9.6 million in cash, stock, and contingent 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.

The Company paid approximately $49.7 million in cash and stock.

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, 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 $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, 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 $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, 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, subject to normal transaction adjustments customary for a transaction of this size and nature.

Our business is highly competitive.

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Human Capital

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 employed 2,675 people as of December 31, 2022 with approximately 2,433 people located in the United States and 242 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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Employee Safety .

The safety and well-being of DXP's colleagues around the world has been, and always will be, its top priority.

Guided by the Company's Safety Service offering, business and the philosophy that every accident is preventable, DXP strives every day to foster a proactive safety culture.

DXP's safety strategy is based on the following core principles:

The safety and well-being of the Company's colleagues around the world has been, and always will be, its top priority.

Guided by the Company's Safety Service offering, business and the philosophy that every accident is preventable, the Company strives every day to foster a proactive safety culture.

The Company's safety strategy is based on the following core principles:

(i) a goal of zero accidents, (ii) shared ownership for safety (business and individual);

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The Company operates under a balanced centralized and decentralized entrepreneurial culture that is crucial to the Company's performance and is one of the three unique elements of the Company's business model.

DXP believes its colleagues around the world thrive in this culture, as it allows them to experience significant autonomy, a sense of shared ownership with their colleagues, and a work atmosphere deeply rooted in the Company's core values.

The Company believes its colleagues around the world thrive in this culture, as it allows them to experience significant autonomy, a sense of shared ownership with their colleagues, and a work atmosphere deeply rooted in the Company's core values.

Compensation and Benefits.

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Diversity and Inclusion.

DXP believes it is at its best when it brings together unique perspectives, experiences and ideas.

The Company is committed to equal employment opportunity, fair treatment and creating diverse and inclusive workplaces where all DXP colleagues can perform to their full potential.

The Company believes it is at its best when it brings together unique perspectives, experiences and ideas.

The Company is committed to equal employment opportunity, fair treatment and creating diverse and inclusive workplaces where all the Company's colleagues can perform to their full potential.

We strive to maintain an inclusive environment free from discrimination of any kind, including sexual or other discriminatory harassment.

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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 April 5, 2022.

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

The following is a list of the Company's executive officers, their age, positions, and a description of each officer’s business experience as of April 17, 2023.

All of our executive officers hold office at the pleasure of the Company's Board of Directors.

NAME AGE TITLE

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Paz Maestas 43 Senior Vice President/Chief Marketing & Technology Officer

Gene Padgett 51 Senior Vice President/Chief Accounting Officer

Vinson 72 Senior Vice President/Innovative Pumping Solutions

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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.

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

Gene Padgett .

Padgett was appointed Senior Vice President/Chief Accounting Officer in May 2018.

Prior to joining the Company, Mr.

Padgett spent ten years with Spectra Energy in several positions with increasing responsibility including General Manager of U.S.

and Canadian Tax, Director of U.S.

Operations Accounting and General Manager Corporate Accounting.

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 LLP.

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

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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