DXP ENTERPRISES INC 10-Q

ITEM 1: FINANCIAL STATEMENTS DXP ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (in thousands, except per share amounts) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Sales $ 428,040 $ 367,812 $ 852,307 $ 687,223 Cost of sales 296,188 263,550 595,414 488,076 Gross profit 131,852 104,262 256,893 199,147 Selling, general and administrative expenses 94,372 78,342 184,014 151,667 Income from operations 37,480 25,920 72,879 47,480 Other (income) expense, net ( 242 ) 839 ( 712 ) 1,377 Interest expense 11,863 5,615 23,384 10,777 Income before income taxes 25,859 19,466 50,207 35,326 Provision for income tax expense 6,805 4,973 13,573 8,305 Net income 19,054 14,493 36,634 27,021 Net income (loss) attributable to noncontrolling interest — 60 — ( 53 ) Net income attributable to DXP Enterprises, Inc. 19,054 14,433 36,634 27,074 Preferred stock dividend 22 22 45 45 Net income attributable to common shareholders $ 19,032 $ 14,411 $ 36,589 $ 27,029 Net income $ 19,054 $ 14,493 $ 36,634 $ 27,021 Currency translation adjustments 659 ( 3,591 ) 757 ( 1,922 ) Comprehensive income $ 19,713 $ 10,902 $ 37,391 $ 25,099 Earnings per share (Note 9) : Basic $ 1.11 $ 0.77 $ 2.10 $ 1.45 Diluted $ 1.06 $ 0.74 $ 2.01 $ 1.39 Weighted average common shares outstanding: Basic 17,211 18,766 17,402 18,651 Diluted 18,051 19,606 18,242 19,491 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 DXP ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) (unaudited) June 30, 2023 December 31, 2022 ASSETS Current assets: Cash $ 15,533 $ 46,026 Restricted cash 91 91 Accounts receivable, net of allowance of $ 8,495 and $ 7,610 , respectively 318,651 320,880 Inventories 104,950 101,392 Costs and estimated profits in excess of billings 46,770 23,588 Prepaid expenses and other current assets 15,274 21,644 Income taxes receivable 7,698 2,493 Total current assets 508,967 516,114 Property and equipment, net 47,538 45,964 Goodwill 342,273 333,759 Other intangible assets, net 72,466 79,585 Operating lease right of use assets, net 54,051 57,402 Other long-term assets 9,138 4,456 Total assets $ 1,034,433 $ 1,037,280 LIABILITIES AND EQUITY Current liabilities: Current maturities of debt $ 4,369 $ 4,369 Trade accounts payable 93,978 100,784 Accrued wages and benefits 28,563 26,260 Customer advances 15,555 20,128 Billings in excess of costs and estimated profits 5,333 10,411 Short-term operating lease liabilities 17,324 18,083 Other current liabilities 42,843 32,866 Total current liabilities 207,965 212,901 Long-term debt, net of unamortized debt issuance costs 408,430 409,205 Long-term operating lease liabilities 37,650 40,189 Other long-term liabilities 8,718 4,701 Deferred income taxes liability 2,205 4,892 Total long-term liabilities 457,003 458,987 Total liabilities 664,968 671,888 Commitments and contingencies ( Note 10 ) Shareholders' equity: Series A and B preferred stock, $ 1.00 par value each; 1,000,000 shares authorized each 16 16 Common stock, $ 0.01 par value, 100,000,000 shares authorized; 16,788,711 and 17,690,069 outstanding, respectively 345 345 Additional paid-in capital 214,852 213,937 Retained earnings 287,138 250,549 Accumulated other comprehensive loss ( 30,918 ) ( 31,675 ) Treasury stock, at cost 3,523,707 and 2,435,352 shares, respectively ( 101,968 ) ( 67,780 ) Total DXP Enterprises, Inc. equity 369,465 365,392 Total liabilities and equity $ 1,034,433 $ 1,037,280 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 DXP ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Six Months Ended June 30, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income 36,634 27,021 Reconciliation of net income to net cash provided by operating activities: Depreciation 4,145 5,006 Amortization of intangible assets and deferred financing costs 10,749 9,742 Provision for credit losses 1,001 314 Payment of contingent consideration liability in excess of acquisition-date fair value ( 79 ) — Fair value adjustment on contingent consideration 839 1,689 Restricted stock compensation expense 1,347 863 Deferred income taxes ( 6,313 ) 1,610 Changes in operating assets and liabilities: Accounts receivables, net 3,815 ( 50,616 ) Costs and estimated profits in excess of billings ( 23,151 ) ( 8,466 ) Accounts payable and accrued expenses 1,721 42,030 Prepaid expenses and other assets 5,226 ( 3,328 ) Inventories ( 3,179 ) ( 15,754 ) Billings in excess of costs and estimated profits ( 5,095 ) ( 1,502 ) Other long-term liabilities ( 3,643 ) ( 2,923 ) Net cash provided by operating activities $ 24,017 $ 5,686 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 5,617 ) ( 1,848 ) Acquisition of businesses, net of cash acquired ( 8,488 ) ( 44,117 ) Net cash used in investing activities $ ( 14,105 ) $ ( 45,965 ) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings on asset-backed credit facility 7,870 231,968 Repayments on asset-backed credit facility ( 7,870 ) ( 202,844 ) Repayments under term loan facility ( 2,184 ) ( 1,650 ) Payment for acquisition contingent consideration liability ( 3,921 ) — Preferred stock dividends paid ( 45 ) ( 45 ) Shares repurchased held in treasury ( 33,583 ) ( 15,116 ) Payment for employee taxes withheld from stock awards ( 432 ) ( 290 ) Net cash (used in) provided by financing activities $ ( 40,165 ) $ 12,023 Effect of foreign currency on cash ( 240 ) ( 159 ) Net change in cash and restricted cash ( 30,493 ) ( 28,415 ) Cash and restricted cash at beginning of period 46,117 49,080 Cash and restricted cash at end of period $ 15,624 $ 20,665 Supplemental schedule of non-cash investing and financing activities: Shares issued for acquisitions ( Note 12 ) — 4,744 Shares repurchased held in treasury ( Note 13 ) $ ( 605 ) $ — The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 DXP ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (in thousands) (unaudited) Series A preferred stock Series B preferred stock Common stock Paid-in capital Retained earnings Treasury stock Non controlling interest Accum other comp loss Total equity Balance at December 31, 2022 $ 1 $ 15 $ 345 $ 213,937 $ 250,549 $ ( 67,780 ) $ — $ ( 31,675 ) $ 365,392 Preferred dividends paid — — — — ( 23 ) — — — ( 23 ) Restricted stock compensation expense — — — 476 — — — — 476 Tax related items for share based awards — — — ( 104 ) — — — — ( 104 ) Currency translation adjustment — — — — — — — 98 98 Repurchases of shares — — — — — ( 9,135 ) — — ( 9,135 ) Net income (loss) — — — — 17,580 — — — 17,580 Balance at March 31, 2023 1 15 345 214,309 268,106 ( 76,915 ) — ( 31,577 ) 374,284 Preferred dividends paid — — — — ( 22 ) — — — ( 22 ) Restricted stock compensation expense — — — 871 — — — — 871 Tax related items for share based awards — — — ( 328 ) — — — — ( 328 ) Currency translation adjustment — — — — — — — 659 659 Repurchases of shares — — — — — ( 25,053 ) — — ( 25,053 ) Net income (loss) — — — — 19,054 — — — 19,054 Balance at June 30, 2023 $ 1 $ 15 $ 345 $ 214,852 $ 287,138 $ ( 101,968 ) $ — $ ( 30,918 ) $ 369,465 Series A preferred stock Series B preferred stock Common stock Paid-in capital Retained earnings Treasury stock Non controlling interest Accum other comp loss Total equity Balance at December 31, 2021 $ 1 $ 15 $ 195 $ 206,772 $ 202,484 $ ( 33,511 ) $ 53 $ ( 29,282 ) $ 346,727 Preferred dividends paid — — — — ( 23 ) — — — ( 23 ) Restricted stock compensation expense — — — 370 — — — — 370 Tax related items for share based awards — — — ( 159 ) — — — — ( 159 ) Issuance of shares of common stock — — 527 — — — — 527 Currency translation adjustment — — — — — — — 1,669 1,669 Repurchases of shares — — — — — ( 1,513 ) — — ( 1,513 ) Net income (loss) — — — — 12,642 — ( 113 ) — 12,529 Balance at March 31, 2022 1 15 195 207,510 215,103 ( 35,024 ) ( 60 ) ( 27,613 ) 360,127 Preferred dividends paid — — — — ( 22 ) — — — ( 22 ) Restricted stock compensation expense — — — 493 — — — — 493 Tax related items for share based awards — — — ( 131 ) — — — — ( 131 ) Issuance of shares of common stock — — 2 4,215 — — — — 4,217 Currency translation adjustment — — — — — — — ( 3,591 ) ( 3,591 ) Net income (loss) — — — — 14,433 — 60 — 14,493 Balance at June 30, 2022 $ 1 $ 15 $ 197 $ 212,087 $ 229,514 $ ( 35,024 ) $ — $ ( 31,204 ) $ 375,586 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 6 DXP ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - THE COMPANY DXP Enterprises, Inc. together with its subsidiaries (collectively "DXP," the "Company," "us," "we," or "our") was incorporated in Texas on July 26, 1996. DXP Enterprises, Inc. and its subsidiaries are engaged in the business of distributing maintenance, repair and operating ("MRO") products and services to a variety of end markets and business-to-business customers. Additionally, DXP provides integrated, custom pump skid packages, pump remanufacturing and manufactures branded private label pumps to energy and broad industrial customers. The Company is currently organized into three business segments: Service Centers ("SC"), Supply Chain Services ("SCS") and Innovative Pumping Solutions ("IPS"). See Note 11 - Segment Reporting for discussion of the business segments. 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"). For interim financial reporting not all disclosures normally required in annual consolidated financial statements prepared in accordance with US GAAP are required. The unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2022 that are included in our annual report on Form 10-K filed with the SEC on April 17, 2023 (“Annual Report”). The results of operations for the six months ended June 30, 2023 are not necessarily indicative of results expected for the full fiscal year. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary for the fair statement of the Company's financial position, results of operations and cash flows for the interim periods presented. The ownership interest of noncontrolling investors of the Company's subsidiaries are recorded as noncontrolling interest. All inter-company accounts and transactions have been eliminated in consolidation. During the fourth quarter of 2022, the Company became aware of a financing cash flow error related to borrowings and repayments on our asset-backed credit facility as a result of the Company inadvertently duplicating journal entries, resulting in the overstatement of financing cash flow activities from borrowings and repayments related to our revolving credit facility. Management's assessment concluded that the errors were not material, individually or in the aggregate, to any prior period unaudited condensed consolidated financial statements. The Company concluded to revise prior period unaudited condensed consolidated financial statements the next time they were reported. Periods not presented herein will be revised, as applicable, in future filings. The unaudited condensed consolidated financial statements included herein, have been revised to correct for the impact of these errors. The revision for the unaudited condensed consolidated statement of cash flows for the six months ended June 30, 2022, is provided in the following table ( in thousands ): As Previously Reported Adjustments Revised Proceeds from asset-backed credit facility $ 235,969 $ ( 4,001 ) $ 231,968 Payments on asset-backed credit facility ( 206,845 ) 4,001 ( 202,844 ) The change did not result in a change in net income or earnings per share for the three and six months ended June 30, 2022. Additionally, the change did not result in a change in the unaudited condensed consolidated balance sheets and statements of equity. NOTE 3 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS The Company has implemented all new accounting pronouncements that are in effect and is evaluating any new accounting pronouncements that may impact its financial statements, including the new Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers standard. The Company does not believe the new accounting pronouncement will have a material impact on its financial position or results of operations for recent acquisitions. Accounting Pronouncements Not Yet Adopted All other new accounting pronouncements that have been issued, but not yet effective, are currently being evaluated and at this time are not expected to have a material impact on our financial position or results of operations. 7 NOTE 4 - FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES Our acquisitions may include contingent consideration as part of the purchase price. The fair value of the contingent consideration is estimated as of the acquisition date based on the present value of the contingent payments to be made using a weighted probability of possible payments. The unobservable inputs used in the determination of the fair value of the contingent consideration include management's assumptions about the likelihood of payment based on the established benchmarks, discount rates, and an internal rate of return analysis. The fair value measurement includes inputs that are Level 3 inputs as they are not observable in the market. Should actual results increase or decrease as compared to the assumptions used in our analysis, the fair value of the contingent consideration obligations will increase or decrease, up to the contracted limit, as applicable. Changes in the fair value of the contingent earn-out consideration are measured each reporting period and reflected in our results of operations. As of June 30, 2023, we recorded liabilities in other current and long-term liabilities for contingent consideration associated with the acquisitions of Process Machinery, Inc. ("PMI"), Drydon Equipment, Inc. ("Drydon"), Cisco Air Systems, Inc. ("Cisco"), Sullivan Environmental Technologies, Inc. ("Sullivan"), Florida Valve & Equipment, LLC and Environmental MD, Inc. (collectively,“Florida Valve EMD”) and Riordan Materials Corporation (“Riordan”) of $ 1.3 million, $ 1.8 million, $ 2.3 million, $ 1.6 million, $ 0.3 million, and $ 2.2 million, respectively. The following table provides a reconciliation of the beginning and ending balances for each category therein, and gains or losses recognized during the six months ended June 30, 2023 ( in thousands ): Contingent Consideration *Beginning balance at December 31, 2022 $ 10,166 Acquisitions and settlements: Acquisitions ( Note 12 ) 2,498 Settlements ( 4,000 ) Total remeasurement adjustments: Changes in fair value recorded in other (income) expense, net 839 *Ending Balance at June 30, 2023 $ 9,503 *Amounts included in other current liabilities were $ 6.1 million and $ 5.5 million for the periods ending June 30, 2023 and December 31, 2022, respectively. Amounts included in long-term liabilities were $ 3.4 million and $ 4.7 million for the periods ending June 30, 2023 and December 31, 2022, respectively. Sensitivity to Changes in Significant Unobservable Inputs The significant Level 3 unobservable inputs used in the fair value measurement of contingent consideration related to the acquisitions of PMI, Drydon, Cisco, Sullivan, Florida Valve EMD, and Riordan are annualized EBITDA forecasts developed by the Company's management and the probability of achievement of those EBITDA results. The discount rate used in the calculations was between 9.2 percent and 9.6 percent. Changes in our unobservable inputs in isolation would result in a change to our fair value measurement. Other financial instruments not measured at fair value on the Company's unaudited condensed consolidated balance sheets at June 30, 2023 and December 31, 2022, but which require disclosure of their fair values include: cash, restricted cash, accounts receivable, trade accounts payable and accrued expenses. The Company believes that the estimated fair value of such instruments at June 30, 2023 and December 31, 2022 approximates their carrying value as reported on the unaudited condensed consolidated balance sheets due to the relative short maturity of these instruments. See Note 8 - Long-term Debt for fair value disclosures on our asset-backed line of credit and term loan debt under our syndicated credit agreement facilities. NOTE 5 – INVENTORIES The carrying values of inventories are as follows ( in thousands ): June 30, 2023 December 31, 2022 Finished goods $ 95,410 $ 82,906 Work in process 9,540 18,486 Inventories $ 104,950 $ 101,392 8 NOTE 6 – CONTRACT ASSETS AND LIABILITIES Under our customized pump production and water and wastewater project contracts in our IPS segment, amounts are billed as work progresses in accordance with agreed-upon contractual terms, upon various measures of performance, including achievement of certain milestones, completion of specified units, or completion of a contract. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets presented as "Costs and estimated profits in excess of billings". However, we sometimes receive advances or deposits from our customers before revenue is recognized, resulting in contract liabilities that are presented as “Billings in excess of costs and estimated profits” on our unaudited condensed consolidated balance sheets. Costs and estimated profits on uncompleted contracts and related amounts billed were as follows ( in thousands ): June 30, 2023 December 31, 2022 Costs incurred on uncompleted contracts $ 97,872 $ 70,329 Estimated profits, thereon 31,966 23,274 Total costs and estimated profits on uncompleted contracts 129,838 93,603 Less: billings to date 88,414 80,421 Net $ 41,424 $ 13,182 Such amounts were included in the accompanying unaudited condensed consolidated balance sheets for June 30, 2023 and December 31, 2022 under the following captions ( in thousands ): June 30, 2023 December 31, 2022 Costs and estimated profits in excess of billings $ 46,770 $ 23,588 Billings in excess of costs and estimated profits ( 5,333 ) ( 10,411 ) Translation adjustment ( 13 ) 5 Net $ 41,424 $ 13,182 During the six months ended June 30, 2023, $ 10.0 million of the balances that were previously classified as contract liabilities at the beginning of the period were recognized in revenues. Contract asset and liability changes were primarily due to normal activity and timing differences between our performance and customer payments. NOTE 7 – INCOME TAXES Income tax expense during interim periods is based on our estimated annual effective income tax rate plus any discrete items, which are recorded in the period in which they occur. Our effective tax rate from continuing operations was a tax expense of 26.3 percent for the three months ended June 30, 2023 compared to a tax expense of 25.5 percent for the three months ended June 30, 2022. Compared to the U.S. statutory rate for the three months ended June 30, 2023, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions recorded for research and development tax credits and was partially offset by research and development tax credits and other tax credits. Our effective tax rate from continuing operations was a tax expense of 27.0 percent for the six months ended June 30, 2023 compared to a tax expense of 23.5 percent for the six months ended June 30, 2022. Compared to the U.S. statutory rate for the six months ended June 30, 2023, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions recorded for research and development tax credits and was partially offset by research and development tax credits and other tax credits. Compared to the U.S. statutory rate for the six months ended June 30, 2022, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses and uncertain tax positions for research and development tax credits and was partially offset by research and development tax credits and other tax credits. To the extent penalties and interest would be assessed on any underpayment of income tax, such accrued amounts would be classified as a component of income tax provision (benefit) in the financial statements consistent with the Company’s policy. 9 NOTE 8 – LONG-TERM DEBT The components of the Company's long-term debt consisted of the following ( in thousands ): June 30, 2023 December 31, 2022 Carrying Value (1) Fair Value Carrying Value (1) Fair Value ABL Revolver $ — $ — $ — $ — Term Loan B 425,949 428,079 428,133 411,008 Total long-term debt 425,949 428,079 428,133 411,008 Less: current portion ( 4,369 ) ( 4,391 ) ( 4,369 ) ( 4,194 ) Long-term debt less current maturities $ 421,580 $ 423,688 $ 423,764 $ 406,814 (1) Carrying value amounts do not include unamortized debt issuance costs of $ 13.2 million and $ 14.6 million for June 30, 2023 and December 31, 2022, respectively. Credit Agreements On July 19, 2022, the Company entered into an Amended and Restated Loan and Security Agreement (the “ABL Credit Agreement”) that provided for a $ 135.0 million asset-backed revolving line of credit (the "ABL Revolver"). The ABL Credit Agreement amends and restates the Loan and Security Agreement dated as of August 29, 2017. Subject to the conditions set forth in the ABL Credit Agreement, the ABL Revolver may be increased by up to an aggregate of $ 50.0 million, in minimum increments of $ 10.0 million. The ABL Revolver matures on July 19, 2027. As of June 30, 2023, the Company had no borrowings outstanding under the ABL Revolver, and total borrowing capacity under the ABL Revolver was $ 132.3 million, net of the letters of credit outstanding. On November 22, 2022, the Company entered into an amendment to its existing $ 330 million Senior Secured Term Loan (the "Term Loan Amendment"), borrowing an additional $ 105 million that was added to the existing $ 330 million Senior Secured Term Loan (the “Term Loan Agreement”). As of June 30, 2023 there was $ 425.9 million outstanding under the Term Loan Agreement. The Term Loan Amendment amends and supplements the Term Loan Agreement, dated as of December 23, 2020, and provides for among other things, $ 105.0 million in new incremental commitments. The Term Loan Agreement and Term Loan Amendment amortizes in equal quarterly installments of 0.25 percent with the balance payable in December 2027 when the facility matures. Subject to securing additional lender commitments, the Term Loan Agreement allows for incremental increases in facility size up to an aggregate of $ 85.0 million, plus an additional amount such that the Company's Secured Leverage Ratio (as defined in the Term Loan Agreement) would not exceed 3.75 to 1.00. Interest accrues on the Term Loan at a rate equal to SOFR plus a margin of 5.25 percent for the SOFR Loans (as defined in the Term Loan Amendment). We are required to repay the Term Loan with certain asset sales and insurance proceeds, certain debt proceeds and 50 percent of excess cash flow--reducing to (i.) 25 percent if our total leverage ratio is no more than 3.00 to 1.00 and (ii.) zero percent if our total leverage ratio is no more than 2.50 to 1.00. The Company was in compliance with all financial covenants under the ABL Credit Agreement and Term Loan Agreements as of June 30, 2023. 10 NOTE 9 - EARNINGS PER SHARE 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 June 30, Six Months Ended June 30, 2023 2022 2023 2022 Basic earnings per share: Weighted average shares outstanding 17,211 18,766 17,402 18,651 Net income attributable to DXP Enterprises, Inc. $ 19,054 $ 14,433 $ 36,634 $ 27,074 Convertible preferred stock dividend 22 22 45 45 Net income attributable to common shareholders $ 19,032 $ 14,411 $ 36,589 $ 27,029 Per share amount $ 1.11 $ 0.77 $ 2.10 $ 1.45 Diluted earnings per share: Weighted average shares outstanding 17,211 18,766 17,402 18,651 Assumed conversion of convertible preferred stock 840 840 840 840 Total dilutive shares 18,051 19,606 18,242 19,491 Net income attributable to common shareholders $ 19,032 $ 14,411 $ 36,589 $ 27,029 Convertible preferred stock dividend 22 22 45 45 Net income attributable to DXP Enterprises, Inc. $ 19,054 $ 14,433 $ 36,634 $ 27,074 Per share amount $ 1.06 $ 0.74 $ 2.01 $ 1.39 NOTE 10 - 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 or estimate the financial impact of these disputes, it believes that the ultimate resolution will not have, either individually or in the aggregate, a material adverse effect on DXP's consolidated financial position, cash flows, or results of operations. NOTE 11 - SEGMENT REPORTING The Company's reportable business segments are: Service Centers, Innovative Pumping Solutions and Supply Chain Services. The Service Centers segment is engaged in providing MRO products, equipment and integrated services, including logistics capabilities, to business-to-business customers. The Service Centers segment provides a wide range of MRO products in the rotating equipment, bearing, power transmission, hose, fluid power, metal working, industrial supply, safety products and safety services categories. The Innovative Pumping Solutions segment fabricates and assembles custom-made pump packages, re-manufactures pumps, manufactures branded private label pumps and provides products and process lines for the water and wastewater treatment industries. The Supply Chain Services segment provides a wide range of MRO products and manages all or part of a customer's supply chain, including warehouse and inventory management. Sales are shown net of inter-segment eliminations. 11 The following table sets out financial information related to the Company's segments excluding amortization( in thousands ): Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Sales Service Centers $ 298,432 $ 251,098 $ 593,658 $ 469,894 Innovative Pumping Solutions 63,441 57,788 125,439 110,846 Supply Chain Services 66,167 58,926 133,210 106,483 Total Sales $ 428,040 $ 367,812 $ 852,307 $ 687,223 Operating Income Service Centers $ 44,129 $ 32,368 $ 88,834 $ 59,719 Innovative Pumping Solutions 10,178 8,726 20,483 15,795 Supply Chain Services 5,416 4,958 10,929 8,978 Total Segments Operating Income $ 59,723 $ 46,052 $ 120,246 $ 84,492 The following table presents reconciliations of income from operations for reportable segments to the consolidated income before taxes ( in thousands ): Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Income from operations for reportable segments $ 59,723 $ 46,052 $ 120,246 $ 84,492 Adjustment for: Amortization of intangible assets 4,582 4,591 9,340 8,826 Corporate expenses 17,661 15,541 38,027 28,186 Income from operations $ 37,480 $ 25,920 72,879 47,480 Interest expense 11,863 5,615 23,384 10,777 Other (income) expense, net ( 242 ) 839 ( 712 ) 1,377 Income before income taxes $ 25,859 $ 19,466 $ 50,207 $ 35,326 NOTE 12 - BUSINESS ACQUISITIONS On May 1, 2023, the Company completed the acquisition of Florida Valve EMD, a leading provider of valve and related products and services for the municipal water markets in the State of Florida. Florida Valve EMD is included within our IPS business segment. Total consideration for the transaction was approximately $ 3.0 million, funded with a mixture of cash on hand of $ 2.6 million and future consideration of $ 0.3 million. Goodwill for the transaction totaled approximately $ 2.0 million. On May 1, 2023, the Company completed the acquisition of Riordan, a leading provider of products for water treatment, wastewater treatment, odor control, solids handling, pumping and bio solid processes in the States of Maryland, New Jersey, Pennsylvania, Delaware and Virginia. Riordan is included within our IPS business segment. Total consideration for the transaction was approximately $ 8.4 million, funded with a mixture of cash on hand of $ 6.2 million and future consideration of $ 2.2 million. Goodwill for the transaction totaled approximately $ 5.9 million. In aggregate, the acquisition-date fair value of the consideration transferred for the two businesses totaled $ 11.3 million, which consisted of the following ( in thousands ): Purchase Price Consideration Cash payments $ 8,844 Future consideration 2,498 Total purchase price consideration $ 11,342 12 Pro forma results of operations information have not been presented, as the effect of the recent acquisitions is not material. The operating results of Riordan and Florida Valve EMD are included within the Company's consolidated statements of operations since the acquisition date of May 1, 2023 and were not material for the six months ended June 30, 2023. Pursuant to US GAAP, costs incurred to complete the acquisitions as well as costs incurred to integrate into the Company’s operations are expensed as incurred. Transaction-related costs incurred, which are included within Selling, general, and administrative expenses in the consolidated statements of operations, were not material for the six months ended June 30, 2023. The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date ( in thousands ): Amount Cash $ 352 Accounts receivable 2,236 Inventory 355 Other current assets 134 Non-compete agreements 595 Customer relationships 1,708 Property and equipment 41 Other assets 5 Assets acquired 5,426 Current liabilities assumed ( 1,395 ) Other long term liabilities ( 23 ) Deferred tax liability ( 538 ) Net assets acquired 3,470 Total Consideration 11,342 Goodwill $ 7,872 Of the $ 2.3 million of acquired intangible assets, $ 0.6 million was provisionally assigned to non-compete agreements that are subject to amortization over 5 years, coinciding with the terms of the agreements. In addition, $ 1.7 million was assigned to customer relationships and will be amortized over a period of 8 years. The goodwill total of approximately $ 7.9 million is attributable primarily to expected synergies and the assembled workforce of each entity and is generally not deductible for tax purposes. The Company recognized approximately $ 400 thousand of acquisition related costs that were expensed in the current period. These costs are included in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income in Selling, General and Administrative costs. NOTE 13 - SHARE REPURCHASE On December 15, 2022, the Company announced a new Share Repurchase Program pursuant to which it may repurchase up to $ 85.0 million worth, or 2.8 million shares, of the Company's outstanding common stock over the next 24 months. Total consideration paid to repurchase the shares was recorded in shareholders’ equity as treasury shares. (in thousands, except share data) Three Months Ended June 30, 2023 Six Months Ended June 30, 2023 Total number of shares purchased 748,820 1,088,355 Amount paid $ 23,935 $ 33,182 Average price paid per share $ 31.96 $ 30.49 13