XML 30 R19.htm IDEA: XBRL DOCUMENT
v3.22.2.2

BUSINESS ACQUISITIONS | 9 Months Ended
--- | ---
Sep. 30, 2022
Business Combination and Asset Acquisition [Abstract] |
BUSINESS ACQUISITIONS | BUSINESS ACQUISITIONS On September 1, 2022, the Company completed the acquisition of Sullivan Environmental Technologies, Inc. Sullivan is a leading distributor for the municipal and industrial water and wastewater treatment industries in the states of 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, DXP stock valued at approximately $0.9 million and future consideration of $1.0 million. For the nine months ended September 30, 2022, Sullivan contributed sales of $188 thousand and net income of $54 thousand. Goodwill for the transaction totaled approximately $2.3 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, DXP stock valued at approximately $4.4 million and a draw down of approximately $11 million on the ABL and future consideration of $4.5 million. For the nine months ended September 30, 2022, Cisco contributed sales of $20.6 million and net income of $4.4 million. Goodwill for the transaction totaled approximately $30.4 million. On March 1, 2022, the Company completed the acquisition of 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 with an issuance of DXP's common stock. The Company paid approximately $7.9 million in cash, stock and future consideration. A majority of Drydon's sales are project-based work under the percentage-of-completion accounting model. As a result, Drydon has been included in the IPS business segment. For the nine months ended September 30, 2022, Drydon contributed sales of $4.0 million and net income of $0.7 million. Goodwill for the transaction totaled approximately $4.9 million. On March 1, 2022, the Company completed the acquisition of certain assets of 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, stock and future consideration. For the nine months ended September 30, 2022, Burlingame contributed sales of $2.1 million and net income of $400 thousand. Goodwill for the transaction totaled approximately $0.6 million. The following represents the pro forma unaudited revenue and earnings as if Cisco, Drydon, Burlingame and Sullivan had been included in the consolidated results of the Company for the nine months ended September 30, 2022 and 2021, respectively:
|  | Nine Months Ended September 30,
|  | 2022 |  | 2021
|  | (in thousands/unaudited)
Revenue |  | $ | 1,092,823 |  |  | $ | 860,590 |
Net income |  | $ | 44,170 |  |  | $ | 19,492 |
In aggregate, the acquisition-date fair value of the consideration transferred for the four businesses totaled $67.9 million, which consisted of the following:
Purchase Price Consideration (in millions) |  | Total Consideration
Cash payments |  | $ | 53.9 |
Fair value of stock issued |  | 5.8 |
Future consideration |  | 8.2 |
Total purchase price consideration |  | $ | 67.9 |
The fair value of the 267,248 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. The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):
Acquisitions
| Cisco Recognized as of Acquisition Date (1) |  | Measurement Period Adjustments (2) |  | Cisco Recognized as of Acquisition Date (As Adjusted) |  | All Other |  | Total
Cash | $ | 4,352 |  |  | $ | — |  |  | $ | 4,352 |  |  | $ | 909 |  |  | $ | 5,261 |
Accounts receivable | 5,173 |  |  | — |  |  | 5,173 |  |  | 5,941 |  |  | 11,114 |
Other receivables | — |  |  | — |  |  | — |  |  | 56 |  |  | 56 |
Inventory | 3,032 |  |  | — |  |  | 3,032 |  |  | 37 |  |  | 3,069 |
Other current assets | 472 |  |  | (339) |  |  | 133 |  |  | 5 |  |  | 138 |
Non-compete agreements | 878 |  |  | (1) |  |  | 877 |  |  | 505 |  |  | 1,382 |
Customer relationships | 10,730 |  |  | 6,070 |  |  | 16,800 |  |  | 1,248 |  |  | 18,048 |
Property and equipment | 1,187 |  |  | — |  |  | 1,187 |  |  | 127 |  |  | 1,314 |
Operating lease ROU asset | 2,168 |  |  | — |  |  | 2,168 |  |  | — |  |  | 2,168 |
Other assets | — |  |  | — |  |  | — |  |  | 2 |  |  | 2 |
Assets acquired | $ | 27,992 |  |  | $ | 5,730 |  |  | $ | 33,722 |  |  | $ | 8,830 |  |  | $ | 42,552 |
Short-term operating lease liability | (463) |  |  | — |  |  | (463) |  |  | — |  |  | (463) |
Current liabilities assumed | (5,208) |  |  | — |  |  | (5,208) |  |  | (1,088) |  |  | (6,296) |
Long-term operating lease liability | (1,705) |  |  | — |  |  | (1,705) |  |  | — |  |  | (1,705) |
Deferred tax liability | (2,897) |  |  | (1,515) |  |  | (4,412) |  |  | — |  |  | (4,412) |
Net assets acquired | $ | 17,719 |  |  | $ | 4,215 |  |  | $ | 21,934 |  |  | $ | 7,742 |  |  | $ | 29,676 |
Total Consideration | 52,184 |  |  | (146) |  |  | 52,330 |  |  | 15,558 |  |  | 67,888 |
Goodwill | $ | 34,465 |  |  | $ | (4,069) |  |  | $ | 30,396 |  |  | $ | 7,816 |  |  | $ | 38,212 |
(1) As previously reported in the Notes section in our Quarterly Report on Form 10-Q for the quarter end June 30, 2022. (2) The measurement period adjustments primarily related to the final valuation of intangible assets related to the acquisition of Cisco. Of the $19.4 million of acquired intangible assets, $1.4 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, $18.0 million was assigned to customer relationships, and will be amortized over a period of 8 years. The goodwill total of approximately $38.2 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 less than $300,000 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. The Company also recognized an immaterial amount in costs associated with issuing the shares issued as consideration in the business combination. Those costs were deducted from the recognized proceeds of issuance within stockholders’ equity.

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

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 https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration