XML 39 R24.htm IDEA: XBRL DOCUMENT
v3.21.2

BUSINESS ACQUISITIONS | 12 Months Ended
--- | ---
Dec. 31, 2020
Business Combinations [Abstract] |
BUSINESS ACQUISITIONS | BUSINESS ACQUISITIONS 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. At closing, 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, including but not limited to working capital adjustments. On December 31, 2020, the Company completed the acquisition of APO Pumps & Compressors (“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, following normal transaction adjustments, for example working capital true-ups, customary for a transaction of this size and nature. Approximately, $38.3 million was paid at closing, and $13.4 million has been accrued as of December 31, 2020 as true-up consideration. On December 31, 2020, the Company completed the acquisition of Pumping Solutions, Inc. (“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, for example working capital true-ups. On December 31, 2020, the Company completed the acquisition of Corporate Equipment Company (“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, including working capital true-ups. On February 1, 2020, the Company completed the acquisition of substantially all of the assets of Turbo Machinery Repair (“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, including working capital true-ups, . On January 1, 2020, the Company completed the acquisition of Pumping Systems, Inc. (“PSI”), a distributor of pumps, systems and related services. The PSI acquisition was funded with a mixture of cash on hand as well as issuing DXP's common stock. The PSI acquisition was funded with a mixture of cash on hand as well as issuing DXP's common stock. 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, including working capital true-ups. The following table summarizes the total consideration for 2020 transferred to acquire these companies and in aggregate the amount of identified assets acquired and liabilities assumed at the acquisition dates. The Company is in the process of finalizing third-party valuations of certain intangible assets; thus, the provisional measurements of intangible assets, goodwill and deferred income tax liabilities are subject to change. In addition, the company continues to finalize inventory, ROU Assets and Liabilities as well as other assets acquired. As described above, the acquisitions of Pumping Systems Inc and Turbo Machinery Repair closed in January and February 2020, respectively. Since their acquisition, they have contributed approximately $19.6 million in revenue and $0.8 million in net income for the year ended December 31, 2020. None of these acquisitions were individually material. Two of these acquisitions, PSI and Turbo, contributed revenue and net income (loss) which comprised approximately 1.9% and (2.8)%, respectively, of the Company’s consolidated results for the year ended December 31, 2020.
| Purchase Price Consideration (in thousands) | Total Consideration
| Cash payments | $ | 115,247 |
| Fair value of stock issued (1,480,909 shares) | 29,367 |
| Future consideration | 13,428 |
| Total consideration | $ | 158,042 |
| Cash | $ | 1 |
| Accounts Receivable | 20,204 |
| Inventory | 8,567 |
| Other Current Assets | 190 |
| Property and equipment | 1,811 |
| Non-compete agreements | 2,332 |
| Customer relationships | 37,465 |
| Goodwill | 104,150 |
| Other assets | 696 |
| Assets acquired | $ | 175,416 |
| Current liabilities assumed | (10,674) |
| Deferred tax liability | (6,700) |
| Net assets acquired | $ | 158,042 |
The following represents the pro forma unaudited revenue and earnings as if each of the six 2020 acquisitions had been included in the consolidated results of the Company for the full years ending December 31, 2020 and 2019, respectively:
|  | Years Ended December 31,
|  | 2020 |  | 2019
|  | (in thousands/unaudited)
| Revenue | $ | 1,129,610 |  |  | $ | 1,421,467 |
| Net income (loss) | $ | (15,296) |  |  | $ | 42,209 |
Individual pro forma results for each acquisition are not disclosed, as individually these acquisitions would not have a material impact on the Company's financial statements. The fair value of the 1,480,909 common shares issued was determined based on the closing market price of the Company’s common shares on the acquisition date, adjusted for holding restrictions following consummation. Of the $39.8 million of acquired intangible assets, $2.3 million was provisionally assigned to non-compete agreements that are subject to amortization over 5 years, coincident with the term of these arrangements. In addition, $37.5 million was provisionally assigned to customer relationships, and will be amortized over a period of 8 years. As noted earlier, the fair value of the acquired identifiable intangible assets is provisional pending completion of the final valuations for these assets. The $104.1 million of goodwill was assigned to the Service Centers segment. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of the acquirees. None of the goodwill is expected to be deductible for income tax purposes. As of December 31, 2020, the Company recognized additional goodwill of $463 thousand resulting from the acquisition of PSI and no additional goodwill for the acquisition Turbo which both closed in the First Quarter of 2020. The fair value of accounts receivables acquired is $20.2 million, with the gross contractual amounts of $21.1 million. The Company expects $0.9 million to be uncollectible. The Company recognized $172 thousand of acquisition related costs that were expensed in the current period. These costs are included in the consolidated income statement in Selling, General and Administrative costs. The Company also incurred and recognized an immaterial amount in costs associated with issuing the shares as additional consideration in the acquisitions. Those costs were deducted from the recognized proceeds of issuance within stockholders’ equity. Previous acquisition 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. The Company paid approximately $11.7 million in cash and stock. The purchase price also included approximately $4.6 million in contingent consideration. The purchase was financed with $10.8 million of cash on hand as well as issuing $0.9 million of the Company's common stock. ASI provides the Company's metal working division with new geographic territory and enhances DXP's end market mix. As part of our purchase agreement, we were obligated to pay up to an additional $4.6 million of contingent consideration over three years based on the achievement of certain earnings benchmarks established for calendar years 2018, 2019 and 2020. The purchase price included the estimated fair value of the contingent consideration recorded at the present value of approximately $4.0 million. The estimated fair value of the contingent consideration was determined using a probability-weighted discounted cash flow model. We determined the fair value of the contingent consideration obligations by calculating the probability-weighted payments based on our assessment of the likelihood that the benchmarks will be achieved. The probability-weighted payments were then discounted using a discount rate based on an internal rate of return analysis using the probability-weighted cash flows. The fair value measurement includes earnings forecasts which are a Level 3 measurement as discussed in Note 7 - Fair Value of Financial Assets and Liabilities. The fair value of the contingent consideration is reviewed quarterly over the earn-out period to compare actual earnings before interest, taxes, depreciation and amortization ("EBITDA") achieved to the estimated EBITDA used in our forecasts. As of December 31, 2020, $1.1 million of the actual cash due toward the contingent consideration earned is recorded in current liabilities. The estimated fair value of the contingent consideration is recorded at the present value of $1.1 million at December 31, 2020. Changes in the estimated fair value of the contingent earn-out consideration, up to the total contractual amount, are reflected in our results of operations in the periods in which they are identified. Changes in the fair value of the contingent consideration may materially impact and cause volatility in our future operating results. Changes in our estimates for the contingent consideration are discussed in Note 7 - Fair Value of Financial Assets and Liabilities to our consolidated financial statements.

X
- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration