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BUSINESS ACQUISITIONS | 12 Months Ended
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Dec. 31, 2015
BUSINESS ACQUISITIONS [Abstract] |
BUSINESS ACQUISITIONS | NOTE 13 - BUSINESS ACQUISITIONS All of the Company’s acquisitions have been accounted for using the purchase method of accounting. Revenues and expenses of the acquired businesses have been included in the accompanying consolidated financial statements beginning on their respective dates of acquisition. The allocation of purchase price to the acquired assets and liabilities is based on estimates of fair market value and may be revised if and when additional information the Company is awaiting concerning certain asset and liability valuations is obtained, provided that such information is received no later than one year after the date of acquisition. Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. It specifically includes the expected synergies and other benefits that we believe will result from combining the operations of our acquisitions with the operations of DXP and any intangible assets that do not qualify for separate recognition such as the assembled workforce. On January 2, 2014, the Company completed the acquisition of all of the equity securities and units of B27, LLC (“B27”) by way of a Securities Purchase Agreement to expand DXP’s pump packaging offering. The total transaction value was approximately $304.9 million, including working capital payments and excluding approximately $1.0 million in transaction costs recognized within SG&A in the 2013 statement of income. The purchase price was financed with borrowings under the Facility and approximately $4.0 million (36,000 shares) of DXP common stock. Estimated goodwill of $178.3 million and intangible assets of $81.1 million were recognized for this acquisition. Approximately $154.6 million of the estimated goodwill or intangible assets are expected not to be tax deductible. The estimated goodwill associated with this acquisition is included in the IPS and Service Centers segments. See Note 8 of the Notes to Consolidated Financial Statements regarding the 2015 and 2014 impairments of B27 goodwill. After the acquisition of B27, there was a working capital dispute between the Company and the sellers. During the third quarter of 2015, an accounting expert issued his report on the working capital dispute between DXP and the sellers of B27. The report required DXP to pay the sellers of B27 an additional $11.3 million. Because the time period to allow adjustments of purchase accounting had expired, $7.3 million of the payment was expensed. The remaining $4.0 million of the required payment represents tax refunds, and the $3.6 million federal portion of the refunds has been received. On May 1, 2014, the Company completed the acquisition of all of the equity interests of Machinery Tooling and Supply, LLC (“MT&S”) to expand DXP’s cutting tools offering in the North Central region of the United States. DXP paid approximately $14.6 million for MT&S, which was borrowed under the Facility. DXP has not completed appraisals of intangibles for MT&S, the valuation of working capital items or completed analysis of tax effects, and therefore, has made preliminary estimates for purposes of this disclosure. Estimated goodwill of $4.3 million and intangible assets of $4.1 million were recognized for this acquisition. All of the estimated goodwill is included in the Service Centers segment. On April 1, 2015, the Company completed the acquisition of all of the equity interests of Tool Supply, Inc. (“TSI”) to expand DXP’s cutting tools offering in the Northwest region of the United States. DXP paid approximately $5.0 million for TSI, which was borrowed under the Facility. Estimated goodwill of $2.9 million and intangible assets of $2.0 were recognized for this acquisition. All of the estimated goodwill is included in the Service Centers segment. None of the estimated goodwill or intangible assets are expected to be tax deductible. On September 1, 2015, the Company completed the acquisition of all of the equity interests of Cortech Engineering, LLC (“Cortech”) to expand DXP’s rotating equipment offering to the Western seaboard. DXP paid approximately $14.9 million for Cortech. The purchase was financed with borrowings under the Facility as well as by issuing $4.4 million (148.8 thousand shares) of DXP common stock. DXP has not completed valuations of intangibles for Cortech, the valuation of working capital items or completed the analysis of the tax effects, and therefore has made preliminary estimates for the purposes of this disclosure. Estimated goodwill of $8.8 million and intangible assets of $5.2 were recognized for this acquisition. All of the estimated goodwill is included in the Service Centers segment. Approximately $4.5 million of the goodwill and intangible assets are not deductible for tax purposes. The value assigned to the non-compete agreements and customer relationships for business acquisitions were determined by discounting the estimated cash flows associated with non-compete agreements and customer relationships as of the date the acquisition was consummated. The estimated cash flows were based on estimated revenues net of operating expenses and net of capital charges for assets that contribute to the projected cash flow from these assets. The projected revenues and operating expenses were estimated based on management estimates. Net capital charges for assets that contribute to projected cash flow were based on the estimated fair value of those assets. For B27, a discount rate of 13.5% was deemed appropriate for valuing these assets and were based on the risks associated with the respective cash flows taking into consideration the acquired company’s weighted average cost of capital. For the twelve months ended December 31, 2015, businesses acquired during 2015 and 2014 contributed sales of $9.1 million and $171.1 million, respectively, and earnings (loss) before taxes of approximately $0.2 million and $(91.5) million, respectively. Earnings before taxes include impairment charges of $67.7 million for businesses acquired in 2014. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed during 2015 and 2014 in connection with the acquisitions described above (in thousands):
|  | 2015 |  |  | 2014 |
|  | TSI |  |  | CORTECH |  |  |  | B27 |  |  | MT&S |
Cash |  | $ | - |  |  | $ | - |  |  | $ | 2,538 |  |  | $ | 806 |
Accounts Receivable, net |  |  | 442 |  |  |  | 2,293 |  |  |  | 51,448 |  |  |  | 5,656 |
Inventory |  |  | 475 |  |  |  | 1,243 |  |  |  | 6,472 |  |  |  | 2,522 |
Property and equipment |  |  | 42 |  |  |  | 253 |  |  |  | 14,573 |  |  |  | 557 |
Goodwill and intangibles1 |  |  | 4,929 |  |  |  | 14,048 |  |  |  | 259,412 |  |  |  | 8,405 |
Other assets |  |  | 100 |  |  |  | 21 |  |  |  | 1,791 |  |  |  | 59 |
Assets acquired |  |  | 5,988 |  |  |  | 17,858 |  |  |  | 336,234 |  |  |  | 18,005 |
Current liabilities assumed |  |  | (335 | ) |  |  | (2,610 | ) |  |  | (26,690 | ) |  |  | (3,336 | )
Non-current liabilities assumed2 |  |  | (653 | ) |  |  | (349 | ) |  |  | (15,992 | ) |  |  | - |
Net assets acquired |  | $ | 5,000 |  |  | $ | 14,899 |  |  | $ | 293,552 |  |  | $ | 14,669 |
(1) The amounts in the table above have not been reduced by the $105.3 million, or the $67.7 million, of goodwill impairment charges for B27 recorded in the fourth quarter of 2014 and the second half of 2015, respectively. (2) Includes deferred tax liability of $0.6 million and $16.0 million related to intangible assets acquired for 2015 and 2014, respectively. The pro forma unaudited results of operations for the Company on a consolidated basis for the twelve months ended December 31, 2015 and 2014, assuming the acquisition of businesses completed in 2015 and 2014 (previously discussed in Item 1, Business) were consummated as of January 1, 2014 are as follows (in millions, except per share amounts):
|  | Years Ended December 31, |
|  | 2015 |  |  | 2014 |
Net sales |  | $ | 1,263 |  |  | $ | 1,541 |
Net income (loss) attributable to DXP Enterprises, Inc. |  | $ | (37 | ) |  | $ | (44 | )
Per share data attributable to DXP Enterprises, Inc. |  |  |  |  |  |  |  |
Basic earnings (loss) |  | $ | (2.60 | ) |  | $ | (2.99 | )
Diluted earnings (loss) |  | $ | (2.60 | ) |  | $ | (2.99 | )
The pro forma unaudited results of operations for the Company on a consolidated basis for the twelve months ended December 31, 2014 and 2013, assuming the acquisition of businesses completed in 2014 and 2013 (previously discussed in Item 1, Business) were consummated as of January 1, 2013 are as follows (in millions, except per share amounts):
|  | Years Ended December 31, |
|  | 2014 |  |  | 2013 |
Net sales |  | $ | 1,513 |  |  | $ | 1,496 |
Net income (loss) |  | $ | (45 | ) |  | $ | 71 |
Per share data |  |  |  |  |  |  |  |
Basic earnings (loss) |  | $ | (3.08 | ) |  | $ | 4.90 |
Diluted earnings (loss) |  | $ | (3.08 | ) |  | $ | 4.64 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1497-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1490-128463 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1392-128463 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1486-128463 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4845-128472 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1500-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1524-128463 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4922-128472 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4934-128472 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4926-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1383-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 + Details
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