|
[X]
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934. For the fiscal year ended December 31,
2007
|
|
[ ]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
|
For
the transition period from
|
to
|
Texas
|
76-0509661
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification Number)
|
7272 Pinemont, Houston, Texas
77040
|
(713) 996-4700
|
(Address
of principal executive offices)
|
Registrant’s
telephone number, including area
code.
|
Common Stock, $0.01 Par
Value
|
NASDAQ
|
(Title
of Class)
|
(Name
of exchange on which registered)
|
TABLE
OF CONTENTS
|
|||
DESCRIPTION
|
|||
Item
|
Page
|
||
PART
1
|
|||
1.
|
Business
|
3
|
|
1A.
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Risk
Factors
|
7
|
|
1B.
|
Unresolved
Staff Comments
|
8
|
|
2.
|
Properties
|
8
|
|
3.
|
Legal
Proceedings
|
8
|
|
4.
|
Submission
of Matters to a Vote of Security Holders
|
9
|
|
PART
II
|
|||
5.
|
Market
for the Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
9
|
|
6.
|
Selected
Financial Data
|
10
|
|
7.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
11
|
|
7A.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
18
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|
8.
|
Financial
Statements and Supplementary Data
|
18
|
|
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
42
|
|
9A.
|
Controls
and Procedures
|
42
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|
9B.
|
Other
Information
|
42
|
|
PART
III
|
|||
10.
|
Directors,
Executive Officers, and Corporate Governance
|
42
|
|
11.
|
Executive
Compensation
|
43
|
|
12.
|
Security
Ownership of Certain Beneficial Owners and Management
|
||
and
Related Stockholder Matters
|
43
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||
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
43
|
|
14.
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Principal
Accountant Fees and Services
|
43
|
|
PART
IV
|
|||
15.
|
Exhibits,
Financial Statement Schedules
|
44
|
|
Signatures
|
48
|
·
|
Industry
Consolidation. Industrial customers have reduced the
number of supplier relationships they maintain to lower total purchasing
costs, improve inventory management, assure consistently high levels of
customer service and enhance purchasing power. This focus on fewer
suppliers has led to consolidation within the fragmented industrial
distribution industry.
|
·
|
Customized Integrated Service.
As industrial customers focus on their core manufacturing or other
production competencies, they increasingly are demanding customized
integration services, ranging from value-added traditional distribution to
integrated supply and system design, fabrication, installation and repair
and maintenance services.
|
·
|
Single Source, First-Tier
Distribution. As industrial customers continue to address cost
containment, there is a trend toward reducing the number of suppliers and
eliminating multiple tiers of distribution. Therefore, to lower overall
costs to the MRO customer, some MRO distributors are expanding their
product coverage to eliminate second-tier distributors and the
difficulties associated with
alliances.
|
Shares/Votes
Voted For
|
Shares/Votes
Withheld
|
|
David
Little
|
5,773,359
|
99,971
|
Cletus
Davis
|
5,539,823
|
333,507
|
Timothy
P. Halter
|
5,802,224
|
71,106
|
Kenneth
H. Miller
|
5,802,771
|
70,559
|
Charles
R. Strader
|
5,496,768
|
376,562
|
ITEM
5.
|
Market for the Registrant's
Common Equity, Related Stockholder Matters
and
|
High
|
Low
|
||
2007
|
|||
First
Quarter
|
$ 44.73
|
$ 28.21
|
|
Second
Quarter
|
$ 53.88
|
$ 38.36
|
|
Third
Quarter
|
$ 49.90
|
$ 30.40
|
|
Fourth
Quarter
|
$ 53.25
|
$ 35.53
|
|
2006
|
|||
First
Quarter
|
$ 37.44
|
$ 16.61
|
|
Second
Quarter
|
$ 59.24
|
$ 28.00
|
|
Third
Quarter
|
$ 38.49
|
$ 20.60
|
|
Fourth
Quarter
|
$ 36.61
|
$ 20.72
|
Years
Ended December 31,
|
|||||||||
2003
|
2004
|
2005
|
2006
|
2007
|
|||||
(in
thousands, except per share amounts)
|
|||||||||
Consolidated
Statement of Earnings Data:
|
|||||||||
Sales
|
$ 150,683
|
$ 160,585
|
$ 185,364
|
$ 279,820
|
$ 444,547
|
||||
Gross
Profit
|
38,549
|
39,431
|
49,714
|
78,622
|
125,692
|
||||
Operating
income
|
4,309
|
5,209
|
9,404
|
20,678
|
31,892
|
||||
Income
before income taxes
|
3,197
|
4,384
|
8,615
|
19,404
|
28,897
|
||||
Net
income
|
2,069
|
2,780
|
5,467
|
11,922
|
17,347
|
||||
Per
share amounts
|
|||||||||
Basic
earnings per common share
|
$ 0.49
|
$ 0.67
|
$ 1.24
|
$ 2.34
|
$ 2.95
|
||||
Common
shares outstanding
|
4,072
|
4,027
|
4,349
|
5,063
|
5,849
|
||||
Diluted
earnings per share
|
$ 0.42
|
$ 0.50
|
$ 0.94
|
$ 2.08
|
$ 2.71
|
||||
Common
and common equivalent shares outstanding
|
4,920
|
5,509
|
5,789
|
5,732
|
6,391
|
Consolidated
Balance Sheet Data
|
As
of December 31,
|
||||||||
2003
|
2004
|
2005
|
2006
|
2007
|
|||||
Total
assets
|
$ 48,375
|
$ 48,283
|
$ 72,920
|
$ 116,807
|
$ 286,166
|
||||
Long-term
debt obligations
|
16,675
|
14,925
|
25,109
|
35,174
|
101,989
|
||||
Shareholders’
equity
|
10,076
|
12,876
|
19,589
|
35,718
|
101,511
|
Years
Ended December 31,
|
|||||||||||
2005
|
%
|
2006
|
%
|
2007
|
%
|
||||||
(in
millions, except percentages and per share amounts)
|
|||||||||||
Sales
|
$185.4
|
100.0
|
$
279.8
|
100.0
|
$
444.5
|
100.0
|
|||||
Cost
of sales
|
135.7
|
73.2
|
201.2
|
71.9
|
318.8
|
71.7
|
|||||
Gross
profit
|
49.7
|
26.8
|
78.6
|
28.1
|
125.7
|
28.3
|
|||||
Selling,
general administrative expense
|
40.3
|
21.7
|
57.9
|
20.7
|
93.8
|
21.1
|
|||||
Operating
income
|
9.4
|
5.1
|
20.7
|
7.4
|
31.9
|
7.2
|
|||||
Interest
expense
|
1.0
|
0.5
|
2.0
|
0.7
|
3.3
|
0.7
|
|||||
Other
income and minority interest
|
(0.2)
|
(0.1)
|
(0.7)
|
(0.2)
|
(0.3)
|
-
|
|||||
Income
before income taxes
|
8.6
|
4.7
|
19.4
|
6.9
|
28.9
|
6.5
|
|||||
Provision
for income taxes
|
3.1
|
1.7
|
7.5
|
2.7
|
11.6
|
2.6
|
|||||
Net
income
|
$
5.5
|
3.0%
|
$ 11.9
|
4.2%
|
$ 17.3
|
3.9%
|
|||||
Per
share
|
|||||||||||
Basic
earnings per share
|
$ 1.24
|
$ 2.34
|
$ 2.95
|
||||||||
Diluted
earnings per share
|
$ 0.94
|
$ 2.08
|
$ 2.71
|
December
31,
|
Increase
(Decrease)
|
||||
2006
|
2007
|
||||
(in
Thousands)
|
|||||
Current
portion of long-term debt
|
$ 2,771
|
$ 4,200
|
$ 1,429
|
||
Long-term
debt, less current portion
|
35,174
|
101,989
|
66,815
|
||
Total
long-term debt
|
$ 37,945
|
$ 106,189
|
$
68,244(2)
|
||
Amount
available (1)
|
$ 13,601
|
$ 17,116
|
$ 3,515(3)
|
||
(1)
Represents amount available to be borrowed under our credit facility at
the indicated date.
|
|||||
(2)
The funds obtained from the increase in long-term debt were primarily used
to complete three acquisitions.
|
|||||
(3)
The $3.5 million increase in the amount available is primarily a result of
our new credit facility which allows us to borrow a higher percentage of
our assets compared to our previous credit
facility.
|
December
31,
|
Increase
|
||||
2006
|
2007
|
(Decrease)
|
|||
Days
of sales outstanding (in days)
|
50.2
|
48.2
|
(2.0)
|
||
Inventory
turns
|
5.9
|
5.8
|
(0.1)
|
||
Results
for businesses acquired in 2006 and 2007 were annualized to compute these
performance metrics.
|
Payments
Due by Period
|
|||||||||
Total
|
Less
than 1 Year
|
1–3
Years
|
3-5
Years
|
More
than 5 Years
|
|||||
Long-term
debt, including current portion (1)
|
$106,189
|
$ 4,200
|
$5,609
|
$ 94,745
|
$ 1,635
|
||||
Operating
lease obligations
|
27,612
|
7,313
|
11,196
|
5,790
|
3,313
|
||||
Estimated
interest payments (2)
|
1,446
|
596
|
570
|
229
|
51
|
||||
Total
|
$135,247
|
$
12,109
|
$17,375
|
$100,764
|
$ 4,999
|
||||
(1)
Amounts represent the expected cash payments of our long-term debt and do
not include any fair value adjustment.
|
|||||||||
(2)
Assumes interest rates in effect at December 31, 2007. Assumes debt is
paid on maturity date and not replaced. Does not include interest on the
revolving line of credit as borrowings under this facility
fluctuate. The amounts of interest incurred for borrowings
under the revolving lines of credit were $755,000, $1,301,000 and
$2,595,000 for 2005, 2006 and 2007, respectively. Management
anticipates an increased level of interest payments on the Facility in
2008 as a result of increased debt
levels.
|
Principal
Amount By Expected Maturity
(in
thousands, except percentages)
|
|||||||||||||||
2008
|
2009
|
2010
|
2011
|
2012
|
There-
after
|
Total
|
Fair
Value
|
||||||||
Fixed
Rate Long- term Debt
|
$
1,915
|
$ 1,165
|
$
130
|
$ 106
|
$ 113
|
$
1,635
|
$ 5,064
|
$ 5,064
|
|||||||
Average
Interest Rate
|
5.71%
|
5.7%
|
5.83%
|
6.24%
|
6.25%
|
6.25%
|
|||||||||
Floating
Rate
Long-term
Debt
|
$
2,285
|
$2,301
|
$2,013
|
$ 333
|
$94,193
|
-
|
$101,125
|
$101,125
|
|||||||
Average
Interest
Rate
(1)
|
5.70%
|
5.72%
|
5.68%
|
5.25%
|
6.55%
|
||||||||||
Total
Maturities
|
$
4,200
|
$3,466
|
$ 2,143
|
$ 439
|
$94,306
|
$
1,635
|
$106,189
|
$106,189
|
|||||||
(1) Assumes
floating interest rates in effect at December 31,
2007
|
TABLE
OF CONTENTS
|
|
Reports
of Independent Registered Public Accounting Firm
|
19
|
Consolidated
Balance Sheets
|
22
|
Consolidated
Statements of Income
|
23
|
Consolidated
Statements of Shareholders’ Equity
|
24
|
Consolidated
Statements of Cash Flows
|
25
|
Notes
to Consolidated Financial Statements
|
26
|
DXP
ENTERPRISES, INC., AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(In
Thousands, Except Share and Per Share Amounts)
|
|||
December
31,
|
|||
2006
|
2007
|
||
ASSETS
|
|||
Current
assets:
|
|||
Cash
|
$ 2,544
|
$ 3,978
|
|
Trade
accounts receivable, net of allowances for doubtful
accounts
|
|||
of
$1,482 in 2006 and $2,131 in 2007
|
40,495
|
79,969
|
|
Inventories,
net
|
37,310
|
84,196
|
|
Prepaid
expenses and other current assets
|
652
|
1,650
|
|
Federal
income taxes recoverable
|
1,042
|
-
|
|
Deferred
income taxes
|
1,087
|
1,791
|
|
Total
current assets
|
83,130
|
171,584
|
|
Property
and equipment, net
|
9,944
|
17,119
|
|
Goodwill
|
16,964
|
60,849
|
|
Other
intangibles, net of accumulated amortization of $538 in 2006
and
$3,242
in 2007
|
6,464
|
35,852
|
|
Other
assets
|
305
|
762
|
|
Total
assets
|
$ 116,807
|
$ 286,166
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|||
Current
liabilities:
|
|||
Current
portion of long-term debt
|
$ 2,771
|
$ 4,200
|
|
Trade
accounts payable
|
25,706
|
55,020
|
|
Accrued
wages and benefits
|
6,490
|
10,001
|
|
Customer
advances
|
3,924
|
3,684
|
|
Federal
income taxes payable
|
-
|
1,708
|
|
Other
accrued liabilities
|
4,770
|
5,654
|
|
Total
current liabilities
|
43,661
|
80,267
|
|
Long-term
debt, less current portion
|
35,174
|
101,989
|
|
Deferred
income taxes
|
2,242
|
2,387
|
|
Minority
interest in consolidated subsidiary
|
12
|
12
|
|
Commitments
and contingencies (Note 9)
|
|||
Shareholders’
equity:
|
|||
Series
A preferred stock, 1/10th
vote per share; $1.00 par value; liquidation
preference of $100 per share
($112 at December 31, 2007); 1,000,000
shares authorized; 1,122 shares issued and outstanding
|
1
|
1
|
|
Series
B convertible preferred stock, 1/10th
vote per share; $1.00 par
value; $100 stated value; liquidation
preference of $100 per share
($1,500 at December 31, 2007); 1,000,000 shares
authorized;
15,000 shares
issued and outstanding
|
15
|
15
|
|
Common
stock, $0.01 par value, 100,000,000 shares authorized;
5,124,134
and 6,322,072 shares issued and outstanding, respectively.
|
51
|
63
|
|
Paid-in
capital
|
6,147
|
54,697
|
|
Retained
earnings
|
30,303
|
47,560
|
|
Note
receivable from David R. Little, CEO
|
(799)
|
-
|
|
Treasury
stock; 20,049 common shares, at cost
|
-
|
(825)
|
|
Total
shareholders’ equity
|
35,718
|
101,511
|
|
Total
liabilities and shareholders’ equity
|
$ 116,807
|
$ 286,166
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
|
DXP
ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME
(In
Thousands, Except Per Share Amounts)
|
|||||
Years
Ended December 31,
|
|||||
2005
|
2006
|
2007
|
|||
Sales
|
$ 185,364
|
$ 279,820
|
$ 444,547
|
||
Cost
of sales
|
135,650
|
201,198
|
318,855
|
||
Gross
profit
|
49,714
|
78,622
|
125,692
|
||
Selling,
general and administrative expense
|
40,310
|
57,944
|
93,800
|
||
Operating
income
|
9,404
|
20,678
|
31,892
|
||
Other
income
|
56
|
651
|
349
|
||
Interest
expense
|
(1,000)
|
(1,943)
|
(3,344)
|
||
Minority
interest in loss of consolidated subsidiary
|
155
|
18
|
-
|
||
Income
before provision for income taxes
|
8,615
|
19,404
|
28,897
|
||
Provision
for income taxes
|
3,148
|
7,482
|
11,550
|
||
Net
income
|
5,467
|
11,922
|
17,347
|
||
Preferred
stock dividend
|
(90)
|
(90)
|
(90)
|
||
Net
income attributable to common shareholders
|
$
5,377
|
$ 11,832
|
$ 17,257
|
||
Per
share and share amounts
|
|||||
Basic
earnings per common share
|
$ 1.24
|
$ 2.34
|
$ 2.95
|
||
Common
shares outstanding
|
4,349
|
5,063
|
5,849
|
||
Diluted
earnings per share
|
$ 0.94
|
$ 2.08
|
$ 2.71
|
||
Common
and common equivalent shares
outstanding
|
5,789
|
5,732
|
6,391
|
||
The
accompanying notes are an integral part of these consolidated financial
statements.
|
DXP
ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
Years
Ended December 31, 2005, 2006 and 2007
(In
Thousands, Except Share Amounts)
|
|||||||||||||||
Series
A
Preferred
Stock
|
Series
B
Preferred
Stock
|
Common
Stock
|
Paid-In
Capital
|
Retained
Earnings
|
Treasury
Stock
|
Notes
Receivable
From
Share-
holders
|
Total
|
||||||||
BALANCES
AT DECEMBER 31, 2004
|
$ 1
|
$ 18
|
$ 41
|
$ 2,489
|
$
13,094
|
$(1,797)
|
$ (970)
|
$
12,876
|
|||||||
Collections
on notes
receivable
|
-
|
-
|
-
|
-
|
-
|
-
|
40
|
40
|
|||||||
Dividends
paid
|
-
|
-
|
-
|
-
|
(90)
|
-
|
-
|
(90)
|
|||||||
Cancellation
of Series
B
Preferred Stock in
Treasury
|
-
|
(3)
|
-
|
(267)
|
-
|
270
|
-
|
-
|
|||||||
Purchase
of 6,500 shares
of common
stock
|
-
|
-
|
-
|
-
|
-
|
(95)
|
90
|
(5)
|
|||||||
Exercise
of stock
options
for 1,122,175
shares
of common
stock
|
-
|
-
|
7
|
(328)
|
-
|
1,622
|
-
|
1,301
|
|||||||
Net
income
|
-
|
-
|
-
|
-
|
5,467
|
-
|
-
|
5,467
|
|||||||
BALANCES
AT
DECEMBER
31, 2005
|
1
|
15
|
48
|
1,894
|
18,471
|
-
|
(840)
|
19,589
|
|||||||
Collections
on notes
receivable
|
-
|
-
|
-
|
-
|
-
|
-
|
41
|
41
|
|||||||
Dividends
paid
|
-
|
-
|
-
|
-
|
(90)
|
-
|
-
|
(90)
|
|||||||
Compensation
expense
for
restricted stock and
stock
options
|
-
|
-
|
-
|
220
|
-
|
-
|
-
|
220
|
|||||||
Issuance
of 23,613 shares
of
common stock
|
-
|
-
|
-
|
424
|
-
|
-
|
-
|
424
|
|||||||
Exercise
of stock options
for
305,119 shares of
common
stock
|
-
|
-
|
3
|
3,609
|
-
|
-
|
-
|
3,612
|
|||||||
Net
income
|
-
|
-
|
-
|
-
|
11,922
|
-
|
-
|
11,922
|
|||||||
BALANCES
AT
DECEMBER
31, 2006
|
1
|
15
|
51
|
6,147
|
30,303
|
-
|
(799)
|
35,718
|
|||||||
Exchange
of note
receivable
for 20,049
shares
of common stock
|
-
|
-
|
-
|
-
|
-
|
(825)
|
799
|
(26)
|
|||||||
Dividends
paid
|
-
|
-
|
-
|
-
|
(90)
|
-
|
-
|
(90)
|
|||||||
Compensation
expense
for
restricted stock and
stock
options
|
-
|
-
|
-
|
591
|
-
|
-
|
-
|
591
|
|||||||
Exercise
of stock options
for
199,955 shares of
common
stock
|
-
|
-
|
2
|
3,396
|
-
|
-
|
-
|
3,398
|
|||||||
Sale
of 1,000,000 shares
from
public offering
|
-
|
-
|
10
|
44,563
|
-
|
-
|
-
|
44,573
|
|||||||
Net
income
|
-
|
-
|
-
|
-
|
17,347
|
-
|
-
|
17,347
|
|||||||
BALANCES
AT DECEMBER 31, 2007
|
$ 1
|
$ 15
|
$ 63
|
$54,697
|
$47,560
|
$(825)
|
-
|
$101,511
|
|||||||
The
accompanying notes are an integral part of these consolidated financial
statements.
|
DXP
ENTERPRISES, INC., AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In
Thousands)
|
|||||
Years
Ended December 31
|
|||||
2005
|
2006
|
2007
|
|||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||
Net
income
|
$ 5,467
|
$ 11,922
|
$ 17,347
|
||
Adjustments
to reconcile net income to net
cash
provided by (used in) operating activities –
net
of acquisitions
|
|||||
Depreciation
|
990
|
1,216
|
2,258
|
||
Amortization
|
-
|
538
|
2,704
|
||
Deferred
income taxes
|
306
|
(103)
|
(559)
|
||
Compensation
expense from stock options and
restricted
stock
|
-
|
220
|
591
|
||
Tax
benefit related to exercise of stock options
|
(188)
|
(3,318)
|
(3,197)
|
||
Gain
on sale of property and equipment
|
-
|
(564)
|
(8)
|
||
Minority
interest in loss of consolidated subsidiary
|
(155)
|
(18)
|
-
|
||
Changes
in operating assets and liabilities, net of assets
and
liabilities acquired in business combinations:
|
|||||
Trade
accounts receivable
|
(7,650)
|
(7,046)
|
(9,253)
|
||
Inventories
|
(2,574)
|
(11,650)
|
(6,882)
|
||
Prepaid
expenses and other assets
|
(3,089)
|
(2,553)
|
3,263
|
||
Accounts
payable and accrued expenses
|
5,470
|
11,341
|
7,212
|
||
Net
cash provided by (used in) operating activities
|
(1,423)
|
(15)
|
13,476
|
||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||
Purchase
of property and equipment
|
(572)
|
(2,363)
|
(1,902)
|
||
Purchase
of businesses, net of cash acquired
|
(6,069)
|
(12,075)
|
(125,869)
|
||
Proceeds
from the sale of property and equipment
|
937
|
2,181
|
8
|
||
Net
cash used in investing activities
|
(5,704)
|
(12,257)
|
(127,763)
|
||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||
Proceeds
from debt
|
145,231
|
87,715
|
191,779
|
||
Principal
payments on revolving line of credit,
long-term
debt and notes payable
|
(136,755)
|
(77,600)
|
(123,940)
|
||
Dividends
paid in cash
|
(90)
|
(90)
|
(90)
|
||
Proceeds
from exercise of stock options
|
874
|
584
|
202
|
||
Proceeds
from sale of common stock
|
-
|
424
|
44,573
|
||
Payments
for employee taxes related to exercise of
stock
options
|
(3,906)
|
-
|
-
|
||
Tax
benefit related to exercise of stock options
|
-
|
3,172
|
3,197
|
||
Collections
on notes receivable from shareholders
|
40
|
41
|
-
|
||
Net
cash provided by financing activities
|
5,394
|
14,246
|
115,721
|
||
INCREASE
(DECREASE) IN CASH
|
(1,733)
|
1,974
|
1,434
|
||
CASH
AT BEGINNING OF YEAR
|
2,303
|
570
|
2,544
|
||
CASH
AT END OF YEAR
|
$ 570
|
$ 2,544
|
$ 3,978
|
||
SUPPLEMENTAL
DISCLOSURES:
|
|||||
Cash
paid for --
|
|||||
Interest
|
$ 984
|
$ 1,844
|
$ 3,158
|
||
Income
taxes
|
$ 875
|
$ 3,329
|
$ 5,879
|
||
Cash
income tax refunds
|
$ 36
|
$ 470
|
$ 20
|
||
Noncash
activities: Changes in operating assets and liabilities exclude
the $4.5 million after tax benefit of tax deductions related to stock
option exercises in 2005 and the $0.8 million exchange of a note
receivable for 20,049 shares of common stock.
The
accompanying notes are an integral part of these consolidated financial
statements.
|
2006
|
2007
|
||||||
Carrying
Value
|
Fair
Value
|
Carrying
Value
|
Fair
Value
|
||||
Cash
|
$ 2,544
|
$ 2,544
|
$ 3,978
|
$ 3,978
|
|||
Note
receivable from David R. Little, CEO
|
799
|
633
|
-
|
-
|
|||
Long-term
debt, including current portion
|
37,945
|
37,945
|
106,189
|
106,189
|
For
the year ended
December
31, 2005
(in
thousands, except
per
share amounts)
|
|
Pro
forma impact of fair value method (FAS 148)
|
|
Reported
net income attributable to common shareholders
|
$5,377
|
Less: fair
value impact of employee stock compensation
|
(115)
|
Pro
forma net income attributable to common shareholders
|
$5,262
|
Earnings
per common share
|
|
Basic
– as reported
|
$ 1.24
|
Diluted
– as reported
|
$ 0.94
|
Basic
– pro forma
|
$ 1.21
|
Diluted
– pro forma
|
$ 0.92
|
Total
|
Goodwill
|
Other
Intangibles
|
|||
Net
balance as of January 1, 2006
|
$ 7,436
|
$ 7,436
|
$ -
|
||
Acquired
during the year
|
16,530
|
16,530
|
-
|
||
Adjustments
to prior year estimates
|
-
|
(7,002)
|
7,002
|
||
Amortization
|
(538)
|
-
|
(538)
|
||
Balance
as of December 31, 2006
|
$ 23,428
|
$ 16,964
|
$ 6,464
|
||
Acquired
during the year
|
75,286
|
48,067
|
27,219
|
||
Adjustments
to prior year estimates
|
691
|
(4,182)
|
4,873
|
||
Amortization
|
(2,704)
|
-
|
(2,704)
|
||
Balance
as of December 31, 2007
|
$ 96,701
|
$ 60,849
|
$ 35,852
|
As
of December 31, 2006
|
As
of December 31, 2007
|
||||||
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
||||
Vendor
agreements
|
$ 3,773
|
$ ( 205)
|
$ 3,773
|
$ (393)
|
|||
Customer
relationships
|
3,229
|
( 333)
|
33,804
|
(2,632)
|
|||
Non-compete
agreements
|
-
|
-
|
1,517
|
(217)
|
|||
Total
|
$ 7,002
|
$ (538)
|
$ 39,094
|
$ (3,242)
|
2008
|
$4,885
|
2009
|
$4,875
|
2010
|
$4,685
|
2011
|
$4,410
|
2012
|
$4,398
|
Cash
|
$ 1,018
|
Accounts
Receivable
|
4,169
|
Inventory
|
2,847
|
Property
and equipment
|
1,158
|
Goodwill
and intangibles
|
13,512
|
Other
assets
|
348
|
Assets
acquired
|
23,052
|
Current
liabilities assumed
|
(3,661)
|
Non-current
liabilities assumed
|
(788)
|
Net
assets acquired
|
$18,603
|
2007
|
|
Cash
|
$ 643
|
Accounts
Receivable
|
29,348
|
Inventory
|
34,204
|
Property
and equipment
|
7,532
|
Goodwill
and intangibles
|
83,440
|
Other
assets
|
2,628
|
Assets
acquired
|
157,795
|
Current
liabilities assumed
|
(28,052)
|
Non-current
liabilities assumed
|
(317)
|
Net
assets acquired
|
$129,426
|
Years
Ended December 31,
|
|||
2006
|
2007
|
||
(Unaudited)
|
|||
In
Thousands, except for per share data
|
|||
Net
sales
|
$633,088
|
$648,745
|
|
Net
income
|
$ 14,846
|
$ 18,294
|
|
Per
share data
|
|||
Basic
earnings
|
$ 2.91
|
$ 3.12
|
|
Diluted
earnings
|
$ 2.59
|
$ 2.87
|
Years
Ended December 31,
|
|||
2005
|
2006
|
||
(Unaudited)
|
|||
In
Thousands, except for per share data
|
|||
Net
sales
|
$229,162
|
$304,835
|
|
Net
income
|
$ 6,544
|
$ 12,970
|
|
Per
share data
|
|||
Basic
earnings
|
$ 1.48
|
$ 2.55
|
|
Diluted
earnings
|
$ 1.13
|
$ 2.26
|
December
31,
|
|||
2006
|
2007
|
||
(in
Thousands)
|
|||
Finished
goods
|
$39,204
|
$86,203
|
|
Work
in process
|
3,030
|
4,002
|
|
Inventories
at FIFO
|
42,234
|
90,205
|
|
Less
– LIFO allowance
|
(4,924)
|
(6,009)
|
|
Inventories
|
$37,310
|
$84,196
|
December
31,
|
|||
2006
|
2007
|
||
(in
Thousands)
|
|||
Land
|
$1,809
|
$1,809
|
|
Buildings
and leasehold improvements
|
6,808
|
7,120
|
|
Furniture,
fixtures and equipment
|
8,010
|
17,131
|
|
16,627
|
26,060
|
||
Less
– Accumulated depreciation and amortization
|
(6,683)
|
(8,941)
|
|
$9,944
|
$17,119
|
December
31,
|
|||
2006
|
2007
|
||
(in
Thousands)
|
|||
Line
of credit
|
$26,179
|
$94,193
|
|
Unsecured
notes payable to individuals, 3.46% to 4.32% at December
31, 2007,
midterm federal rate adjusted annually,
payable in monthly or quarterly
installments through November 2010
|
347
|
213
|
|
Unsecured
notes payable to individuals, subordinate to credit facility,
6.0%, payable
in monthly installments through
December 2009
|
3,057
|
2,108
|
|
Unsecured
notes payable to individuals, subordinate to credit facility
at variable
rates (5.25% to 6.5% at December 31, 2007)
payable in monthly
installments through June 2011
|
5,063
|
3,969
|
|
Unsecured
note payable to an individual, subordinate to credit facility at variable
rates (5.50% at December 31, 2007)
payable in monthly installments through November 2010
|
-
|
2,750
|
|
Mortgage
loans payable to financial institutions, 6.25% collateralized
by real estate, payable in monthly installments
through
January 2013
|
2,221
|
2,138
|
|
Other
notes
|
1,078
|
818
|
|
37,945
|
106,189
|
||
Less: Current
portion
|
(2,771)
|
(4,200)
|
|
$35,174
|
$101,989
|
2008
|
4,200
|
2009
|
3,466
|
2010
|
2,143
|
2011
|
439
|
2012
|
94,306
|
Thereafter
|
1,635
|
$106,189
|
Years
Ended December 31,
|
|||||
2005
|
2006
|
2007
|
|||
(in
Thousands)
|
|||||
Current
-
|
|||||
Federal
|
$ 2,749
|
$ 6,545
|
$
10,939
|
||
State
|
93
|
1,040
|
1,170
|
||
2,842
|
7,585
|
12,109
|
|||
Deferred
|
306
|
(103)
|
(559)
|
||
$ 3,148
|
$ 7,482
|
$
11,550
|
Years
Ended December 31,
|
|||||
2005
|
2006
|
2007
|
|||
(in
Thousands)
|
|||||
Income
taxes computed at federal statutory rate
|
$ 2,929
|
$ 6,597
|
$
10 ,114
|
||
State
income taxes, net of federal benefit
|
61
|
686
|
760
|
||
Other
|
158
|
199
|
676
|
||
$ 3,148
|
$ 7,482
|
$
11,550
|
December
31,
|
|||
2006
|
2007
|
||
(in
Thousands)
|
|||
Net
current assets
|
$ 1,087
|
$ 1,791
|
|
Net
non-current liabilities
|
(2,242)
|
(2,387)
|
|
Net
assets (liabilities)
|
$
(1,155)
|
$ (596)
|
December
31,
|
|||
2006
|
2007
|
||
(in
Thousands)
|
|||
Deferred
tax assets:
|
|||
Goodwill
|
$ 561
|
$ 473
|
|
Allowance
for doubtful accounts
|
519
|
746
|
|
Inventories
|
244
|
451
|
|
State
net operating loss carryforwards
|
41
|
33
|
|
Accruals
|
247
|
310
|
|
Other
|
312
|
425
|
|
Total
deferred tax assets
|
1,924
|
2,438
|
|
Less
valuation allowance
|
(41)
|
(33)
|
|
Total
deferred tax assets, net of valuation allowance
|
1,883
|
2,405
|
|
Deferred
tax liabilities
|
|||
Goodwill
|
(215)
|
(381)
|
|
Intangibles
|
(2,262)
|
(2,089)
|
|
Property
and equipment
|
(461)
|
(431)
|
|
Other
|
(100)
|
(100)
|
|
Net
deferred tax asset (liability)
|
$ (1,155)
|
$ (596)
|
Number
of shares authorized for grants
|
300,000
|
Number
of shares granted
|
124,258
|
Number
of shares available for future grants
|
175,742
|
Weighted-average
grant price of granted shares
|
$ 32.72
|
Number
Of
Shares
|
Weighted
Average
Grant
Price
|
||
Outstanding
at December 31, 2005
|
-
|
-
|
|
Granted
|
43,698
|
$
24.66
|
|
Outstanding
at December 31, 2006
|
43,698
|
$
24.66
|
|
Granted
|
80,560
|
$
37.09
|
|
Vested
|
(18,032)
|
$
27.31
|
|
Outstanding
at December 31, 2007
|
106,226
|
$
33.63
|
Shares
|
Options
Price
Per
Share
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Fair
Value
|
Aggregate
Intrinsic
Value
|
|||
Outstanding
at December 31, 2004
|
1,723,367
|
$ 0.65
- $ 12.00
|
$1.90
|
||||
Granted
at market price
|
30,000
|
$ 6.72
- $ 6.72
|
$6.72
|
$5.43
|
|||
Exercised
|
(1,122,175)
|
$ 0.65
- $ 12.00
|
$2.19
|
||||
Cancelled
or expired
|
(9,762)
|
$
12.00 - $ 12.00
|
$12.00
|
||||
Outstanding
at December 31, 2005
|
621,430
|
$ 0.92
- $ 12.00
|
$2.10
|
||||
Exercised
|
(305,119)
|
$ 1.00
- $ 12.00
|
$l.28
|
||||
Cancelled
or expired
|
(5,130)
|
$
12.00 - $ 12.00
|
$12.00
|
||||
Outstanding
at December 31, 2006
|
311,181
|
$ 0.92
- $ 6.72
|
$1.41
|
$10,464,000
|
|||
Exercised
|
(199,955)
|
$
0.92 - $ 2.50
|
$1.00
|
||||
Outstanding
and exercisable at December
31, 2007
|
111,226
|
$ 1.00
- $ 6.72
|
$2.15
|
$
4,953,000
|
Options
Outstanding and Exercisable
|
||||||
Weighted
Average
|
||||||
Remaining
|
Weighted
|
|||||
Range
of
|
Number
|
Contractual
Life
|
Average
|
|||
Exercise
Prices
|
Outstanding
|
(in
years)
|
Exercise
Price
|
|||
$1.00
to $2.50
|
91,226
|
2.3
|
$
1.39
|
|||
$4.53
to $6.72
|
20,000
|
6.9
|
5.62
|
|||
111,226
|
3.2
|
2.15
|
2005
|
2006
|
2007
|
|||
(in
Thousands, except per share amounts)
|
|||||
Basic:
|
|||||
Basic
weighted average shares outstanding
|
4,349
|
5,063
|
5,849
|
||
Net
income
|
$5,467
|
$11,922
|
$17,347
|
||
Convertible
preferred stock dividend
|
(90)
|
(90)
|
(90)
|
||
Net
income attributable to common shareholders
|
$5,377
|
$11,832
|
$17,257
|
||
Per
share amount
|
$ 1.24
|
$ 2.34
|
$ 2.95
|
||
Diluted:
|
|||||
Basic
weighted average shares outstanding
|
4,349
|
5,063
|
5,849
|
||
Net
effect of dilutive stock options and restricted stock
-
based on the treasury stock method
|
1,020
|
249
|
122
|
||
Assumed
conversion of convertible preferred
stock
|
420
|
420
|
420
|
||
Total
common and common equivalent shares outstanding
|
5,789
|
5,732
|
6,391
|
||
Net
income attributable to common shareholders
|
$5,377
|
$11,832
|
$17,257
|
||
Convertible
preferred stock dividend
|
90
|
90
|
90
|
||
Net
income for diluted earnings per share
|
$5,467
|
$11,922
|
$17,347
|
||
Per
share amount
|
$ 0.94
|
$ 2.08
|
$ 2.71
|
2008
|
$ 7,313
|
2009
|
6,268
|
2010
|
4,928
|
2011
|
3,651
|
2012
|
2,139
|
Thereafter
|
3,313
|
$
27,612
|
Electrical
|
|||||
MRO
|
Contractor
|
Total
|
|||
(in
Thousands)
|
|||||
2005
|
|||||
Sales
|
$ 182,979
|
$ 2,385
|
$ 185,364
|
||
Operating
income
|
9,097
|
307
|
9,404
|
||
Income
before tax
|
8,452
|
163
|
8,615
|
||
Identifiable
assets
|
71,321
|
1,599
|
72,920
|
||
Capital
expenditures
|
572
|
-
|
572
|
||
Depreciation
and amortization
|
973
|
17
|
990
|
||
Interest
expense
|
856
|
144
|
1,000
|
||
2006
|
|||||
Sales
|
$ 277,031
|
$ 2,789
|
$ 279,820
|
||
Operating
income
|
20,220
|
458
|
20,678
|
||
Income
before tax
|
19,102
|
302
|
19,404
|
||
Identifiable
assets
|
115,570
|
1,237
|
116,807
|
||
Capital
expenditures
|
2,363
|
-
|
2,363
|
||
Depreciation
and amortization
|
1,745
|
9
|
1,754
|
||
Interest
expense
|
1,787
|
156
|
1,943
|
||
2007
|
|||||
Sales
|
$ 441,250
|
$ 3,297
|
$ 444,547
|
||
Operating
income
|
31,483
|
409
|
31,892
|
||
Income
before tax
|
28,597
|
300
|
28,897
|
||
Identifiable
assets
|
284,689
|
1,477
|
286,166
|
||
Capital
expenditures
|
1,891
|
11
|
1,902
|
||
Depreciation
and amortization
|
4,958
|
4
|
4,962
|
||
Interest
expense
|
3,236
|
108
|
3,344
|
13.
|
QUARTERLY
FINANCIAL INFORMATION (Unaudited)
|
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
||||
(in
millions, except per share amounts)
|
|||||||
2005
|
|||||||
Sales
|
$ 41.8
|
$ 45.5
|
$ 43.4
|
$ 54.7
|
|||
Gross
profit
|
11.0
|
12.2
|
11.5
|
15.0
|
|||
Net
income
|
0.8
|
1.5
|
1.1
|
2.1
|
|||
Earnings
per share - diluted
|
0.15
|
0.26
|
0.18
|
0.36
|
|||
2006
|
|||||||
Sales
|
$ 62.5
|
$ 69.8
|
$
68.2
|
$ 79.4
|
|||
Gross
profit
|
17.4
|
19.1
|
19.7
|
22.4
|
|||
Net
income
|
2.5
|
2.9
|
3.0
|
3.5
|
|||
Earnings
per share - diluted
|
0.44
|
0.51
|
0.52
|
0.61
|
|||
2007
|
|||||||
Sales
|
$ 83.6
|
$ 85.3
|
$
106.8
|
$ 168.8
|
|||
Gross
profit
|
24.9
|
24.5
|
29.9
|
46.4
|
|||
Net
income
|
3.7
|
3.4
|
4.5
|
5.7
|
|||
Earnings
per share - diluted
|
0.65
|
0.56
|
0.65
|
0.84
|
|
Management’s
report on the Company’s internal control over financial reporting is
included on page 20 of this Report under the heading
Management’s Annual Report on Internal Control Over Financial
Reporting.
|
|
The
report from Hein & Associates LLP on its audit of the effectiveness of
DXP’s internal control over financial reporting as of December 31, 2007,
is included on page 21 of this Report under the heading Report of
Independent Registered Public Accounting
Firm.
|
DXP
Enterprises, Inc. and Subsidiaries:
|
Page
|
Reports
of Independent Registered Public Accounting Firm
|
19
|
Consolidated
Financial Statements
|
|
Consolidated
Balance Sheets
|
22
|
Consolidated
Statements of Income
|
23
|
Consolidated
Statements of Shareholders' Equity
|
24
|
Consolidated
Statements of Cash Flows
|
25
|
Notes
to Consolidated Financial Statements
|
26
|
2.
|
Financial
Statement Schedules:
|
|
Schedule
II – Valuation and Qualifying
Accounts.
|
3.1
|
Restated
Articles of Incorporation, as amended (incorporated by reference to
Exhibit 4.1 to Registrant’s Registration Statement on Form S-8 (Reg. No.
333-61953), filed with the Commission on August 20,
1998).
|
3.2
|
Bylaws
(incorporated by reference Exhibit 3.2 to the Registrant's Registration
Statement on Form S-4 (Reg. No. 333-10021), filed with the Commission on
August 12, 1996).
|
4.1
|
Form
of Common Stock certificate (incorporated by reference to Exhibit 4.3 to
the Registrant's Registration Statement on Form S-8 (Reg. No. 333-61953),
filed with the Commission on August 20,
1998).
|
4.2
|
See
Exhibit 3.1 for provisions of the Company's Restated Articles of
Incorporation, as amended, defining the rights of security
holders.
|
4.3
|
See
Exhibit 3.2 for provisions of the Company's Bylaws defining the rights of
security holders.
|
+10.1
|
DXP
Enterprises, Inc. 1999 Employee Stock Option Plan (incorporated by
reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form
10-Q for the quarterly period ended June 30,
1999).
|
+10.2
|
DXP
Enterprises, Inc. 1999 Non-Employee Director Stock Option Plan
(incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended June 30,
1999).
|
+10.3
|
DXP
Enterprises, Inc. Long Term Incentive Plan, as amended (incorporated by
reference to Exhibit 4.4 to the Registrant's Registration Statement on
Form S-8 (Reg. No. 333-61953), filed with the Commission on August 20,
1998).
|
+10.4
|
Amendment
No. One to DXP Enterprises, Inc. Non-Employee Director Stock Option Plan
(incorporated by reference to Exhibit 10.8 to the Registrant’s Annual
Report on Form 10-K for the fiscal year ended December 31,
2003).
|
+10.5
|
Employment
Agreement dated effective as of January 1, 2004, between DXP Enterprises,
Inc. and David R. Little (incorporated by reference to Exhibit 10.10
to the Registrant’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2003).
|
+10.6
|
Employment
Agreement dated effective as of June 1, 2004, between DXP Enterprises,
Inc. and Mac McConnell (incorporated by reference to Exhibit 10.1 to the
Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2004.).
|
+10.7
|
Amendment
No. One to DXP Enterprises, Inc. 1999 Employee Stock Option Plan
(incorporated by reference to Exhibit 10.10 to the Registrant’s Annual
Report on Form 10-K for the fiscal year ended December 31,
2004).
|
+10.8
|
Summary
Description of Director Compensation (incorporated by reference to Exhibit
10.11 to the Registrant’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2004).
|
+10.9
|
Summary
Description of Executive Officer Cash Bonus Plan (incorporated by
reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K
for the fiscal year ended December 31,
2004).
|
+10.10
|
Amendment
No. Two to DXP Enterprises, Inc. Non-Employee Director Stock Option Plan
(incorporated by reference to Exhibit 10.13 to the Registrant’s Annual
Report on Form 10-K for the fiscal year ended December 31,
2004).
|
10.11
|
Asset
Purchase Agreement between DXP Enterprises, Inc., as Purchaser, and PMI
Operating Company, Ltd., dated August 22, 2005, DXP Enterprises, Inc.,
(incorporated by reference to Exhibit 99.1 to the Registrant’s Current
Report on Form 8-K filed with the Commission on August 22,
2005).
|
10.12
|
Stock
Purchase Agreement between DXP Enterprises, Inc., as Purchaser, and R. A.
Mueller, Inc., dated December 1, 2005, whereby DXP Enterprises, Inc.
acquired all of the outstanding shares of R. A. Mueller, Inc.
(incorporated by reference to Exhibit 99.1 to the Registrant’s Current
Report on Form 8-K filed with the Commission on December 5,
2005).
|
+10.13
|
DXP
Enterprises, Inc. 2005 Restricted Stock Plan (incorporated by reference to
Exhibit 4.1 to the Registrant’s Registration Statement on Form S-8 (Reg.
No. 333-134606), filed with the Commission on May 31,
2006).
|
10.14
|
Asset
Purchase Agreements between PMI Operating Company, Ltd., as Purchaser,
Production Pump Systems of Levelland, L.P., Machine Tech Services, L.P.,
Production Pump Systems, L.P., and the Partners dated May 1, 2006
(incorporated by reference to Exhibit 99.1 to the Registrant’s Current
Report on Form 8-K filed with the Commission on June 2,
2006).
|
+10.15
|
Amendment
No. One to Employment Agreement dated effective as of January 1, 2004,
between DXP Enterprises, Inc. and David R. Little (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K,
filed with the Commission on July 25,
2006).
|
+10.16
|
Amendment
No. One to DXP Enterprises, Inc. 2005 Restricted Stock Plan (incorporated
by reference to Exhibit 10.2 to the Registrant’s Current Report on Form
8-K, filed with the Commission on July 25,
2006).
|
10.17
|
Asset
Purchase Agreement between DXP Enterprises, Inc., as Purchaser, and Safety
International, Inc., dated October 11, 2006 (incorporated by reference to
Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed with the
Commission on October 11, 2006).
|
10.18
|
Asset
Purchase Agreement between DXP Enterprises, Inc., as Purchaser, and Gulf
Coast Torch & Regulator, dated October 19, 2006 (incorporated by
reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K
filed with the Commission on October 19,
2006).
|
10.19
|
Asset
Purchase Agreement between DXP Enterprises, Inc., as Purchaser, and Safety
Alliance, dated November 1, 2006 (incorporated by reference to Exhibit
99.1 to the Registrant’s Current Report on Form 8-K filed with the
Commission on November 1, 2006).
|
10.20
|
Asset
Purchase Agreement dated as of May 2, 2007 whereby DXP Enterprises
acquired the assets of Delta Process Equipment Company (incorporated by
reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K
filed with the Commission on May 7,
2007).
|
10.21
|
Stock
Purchase Agreement dated as of August 19, 2007 whereby DXP Enterprises
acquired all outstanding stock of Precision Industries, Inc. (incorporated
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
8-K filed with the Commission on August 21,
2007).
|
10.22
|
Credit
Agreement by and among DXP Enterprises as Borrower, and Wells Fargo Bank,
National Association, as Lead Arranger and Administrative Agent for the
Lenders, as Bank, dated as of September 10, 2007 (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
filed with the Commission on September 12,
2007).
|
10.23
|
Asset
Purchase Agreement dated as of October 19, 2007 whereby DXP Enterprises
acquired the assets of Indian Fire & Safety (incorporated by reference
to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with
the Commission on October 22,
2007).
|
*21.1
|
Subsidiaries
of the Company.
|
*23.1
|
Consent
from Hein & Associates LLP, Independent Registered Public Accounting
Firm.
|
*31.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) and rule 15d-14(a)
of the Securities Exchange Act, as
amended.
|
*31.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) and rule 15d-14(a)
of the Securities Exchange Act, as
amended.
|
*32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of
2002
|
*32.2
|
Certification
of Chief Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
SCHEDULE
II – VALUATION AND QUALIFYING ACCOUNTS
DXP
ENTERPRISES, INC.
Years
Ended December 31, 2007, 2006 and 2005
(in
thousands)
|
|||||||||
Description
|
Balance
at
Beginning
of
Year
|
Charged
to
Cost
and
Expenses
|
Charged
to
Other
Accounts
|
Deductions
|
Balance
At
End
of
Year
|
||||
Year
ended December 31, 2007
Deducted
from assets accounts
Allowance
for doubtful accounts
|
$ 1,482
|
$ 552
|
$ 253(3)
|
$ 156(1)
|
$ 2,131
|
||||
Valuation
allowance for deferred
tax
assets
|
$ 41
|
$ -
|
$ -
|
$ 8(2)
|
33
|
||||
Year
ended December 31, 2006
Deducted
from assets accounts
Allowance
for doubtful accounts
|
$ 1,835
|
$ 384
|
$ -
|
$ 737(1)
|
$ 1,482
|
||||
Valuation
allowance for deferred
tax
assets
|
$ 44
|
$ -
|
$ -
|
$ 3
(2)
|
$ 41
|
||||
Year
ended December 31, 2005
Deducted
from assets accounts
Allowance
for doubtful accounts
|
$ 1,776
|
$ 273
|
$ 48(3)
|
$ 262(1)
|
$ 1,835
|
||||
Valuation
allowance for deferred
tax
assets
|
$ 78
|
$ -
|
$ -
|
$ 34
(2)
|
$ 44
|
||||
(1)
Uncollectible accounts written off, net of recoveries
|
|||||||||
(2)
Reduction results from expiration or use of state net operating loss
carryforwards.
|
|||||||||
(3)
Reserve for receivables of acquired
businesses.
|
3.1
|
Restated
Articles of Incorporation, as amended (incorporated by reference to
Exhibit 4.1 to Registrant’s Registration Statement on Form S-8 (Reg. No.
333-61953), filed with the Commission on August 20,
1998).
|
3.2
|
Bylaws
(incorporated by reference Exhibit 3.2 to the Registrant's Registration
Statement on Form S-4 (Reg. No. 333-10021), filed with the Commission on
August 12, 1996).
|
4.1
|
Form
of Common Stock certificate (incorporated by reference to Exhibit 4.3 to
the Registrant's Registration Statement on Form S-8 (Reg. No. 333-61953),
filed with the Commission on August 20,
1998).
|
4.2
|
See
Exhibit 3.1 for provisions of the Company's Restated Articles of
Incorporation, as amended, defining the rights of security
holders.
|
4.3
|
See
Exhibit 3.2 for provisions of the Company's Bylaws defining the rights of
security holders.
|
+10.1
|
DXP
Enterprises, Inc. 1999 Employee Stock Option Plan (incorporated by
reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form
10-Q for the quarterly period ended June 30,
1999).
|
+10.2
|
DXP
Enterprises, Inc. 1999 Non-Employee Director Stock Option Plan
(incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended June 30,
1999).
|
+10.3
|
DXP
Enterprises, Inc. Long Term Incentive Plan, as amended (incorporated by
reference to Exhibit 4.4 to the Registrant's Registration Statement on
Form S-8 (Reg. No. 333-61953), filed with the Commission on August 20,
1998).
|
+10.4
|
Amendment
No. One to DXP Enterprises, Inc. Non-Employee Director Stock Option Plan
(incorporated by reference to Exhibit 10.8 to the Registrant’s Annual
Report on Form 10-K for the fiscal year ended December 31,
2003).
|
+10.5
|
Employment
Agreement dated effective as of January 1, 2004, between DXP Enterprises,
Inc. and David R. Little
(incorporated by reference to Exhibit 10.10 to the Registrant’s Annual
Report on Form 10-K for the fiscal year ended December 31,
2003).
|
+10.6
|
Employment
Agreement dated effective as of June 1, 2004, between DXP Enterprises,
Inc. and Mac McConnell (incorporated by reference to Exhibit 10.1 to the
Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2004.).
|
+10.7
|
Amendment
No. One to DXP Enterprises, Inc. 1999 Employee Stock Option Plan
(incorporated by reference to Exhibit 10.10 to the Registrant’s Annual
Report on Form 10-K for the fiscal year ended December 31,
2004).
|
+10.8
|
Summary
Description of Director Compensation (incorporated by reference to Exhibit
10.11 to the Registrant’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2004).
|
+10.9
|
Summary
Description of Executive Officer Cash Bonus Plan (incorporated by
reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K
for the fiscal year ended December 31,
2004).
|
+10.10
|
Amendment
No. Two to DXP Enterprises, Inc. Non-Employee Director Stock Option Plan
(incorporated by reference to Exhibit 10.13 to the Registrant’s Annual
Report on Form 10-K for the fiscal year ended December 31,
2004).
|
10.11
|
Asset
Purchase Agreement between DXP Enterprises, Inc., as Purchaser, and PMI
Operating Company, Ltd., dated August 22, 2005, DXP Enterprises, Inc.,
(incorporated by reference to Exhibit 99.1 to the Registrant’s Current
Report on Form 8-K filed with the Commission on August 22,
2005).
|
10.12
|
Stock
Purchase Agreement between DXP Enterprises, Inc., as Purchaser, and R. A.
Mueller, Inc., dated December 1, 2005, whereby DXP Enterprises, Inc.
acquired all of the outstanding shares of R. A. Mueller, Inc.
(incorporated by reference to Exhibit 99.1 to the Registrant’s Current
Report on Form 8-K filed with the Commission on December 5,
2005).
|
+10.13
|
DXP
Enterprises, Inc. 2005 Restricted Stock Plan (incorporated by reference to
Exhibit 4.1 to the Registrant’s Registration Statement on Form S-8 (Reg.
No. 333-134606), filed with the Commission on May 31,
2006).
|
10.14
|
Asset
Purchase Agreements between PMI Operating Company, Ltd., as Purchaser,
Production Pump Systems of Levelland, L.P., Machine Tech Services, L.P.,
Production Pump Systems, L.P., and the Partners dated May 1, 2006
(incorporated by reference to Exhibit 99.1 to the Registrant’s Current
Report on Form 8-K filed with the Commission on June 2,
2006).
|
+10.15
|
Amendment
No. One to Employment Agreement dated effective as of January 1, 2004,
between DXP Enterprises, Inc. and David R. Little (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K,
filed with the Commission on July 25,
2006).
|
+10.16
|
Amendment
No. One to DXP Enterprises, Inc. 2005 Restricted Stock Plan (incorporated
by reference to Exhibit 10.2 to the Registrant’s Current Report on Form
8-K, filed with the Commission on July 25,
2006).
|
10.17
|
Asset
Purchase Agreement between DXP Enterprises, Inc., as Purchaser, and Safety
International, Inc., dated October 11, 2006 (incorporated by reference to
Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed with the
Commission on October 11, 2006).
|
10.18
|
Asset
Purchase Agreement between DXP Enterprises, Inc., as Purchaser, and Gulf
Coast Torch & Regulator, dated October 19, 2006 (incorporated by
reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K
filed with the Commission on October 19,
2006).
|
10.19
|
Asset
Purchase Agreement between DXP Enterprises, Inc., as Purchaser, and Safety
Alliance, dated November 1, 2006 (incorporated by reference to Exhibit
99.1 to the Registrant’s Current Report on Form 8-K filed with the
Commission on November 1, 2006).
|
10.20
|
Asset
Purchase Agreement dated as of May 2, 2007 whereby DXP Enterprises
acquired the assets of Delta Process Equipment Company (incorporated by
reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K
filed with the Commission on May 7,
2007).
|
10.21
|
Stock
Purchase Agreement dated as of August 19, 2007 whereby DXP Enterprises
acquired all outstanding stock of Precision Industries, Inc. (incorporated
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
8-K filed with the Commission on August 21,
2007).
|
10.22
|
Credit
Agreement by and among DXP Enterprises as Borrower, and Wells Fargo Bank,
National Association, as Lead Arranger and Administrative Agent for the
Lenders, as Bank, dated as of September 10, 2007 (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
filed with the Commission on September 12,
2007).
|
10.23
|
Asset
Purchase Agreement dated as of October 19, 2007 whereby DXP Enterprises
acquired the assets of Indian Fire & Safety (incorporated by reference
to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with
the Commission on October 22,
2007).
|
*21.1
|
Subsidiaries
of the Company.
|
*23.1
|
Consent
from Hein & Associates LLP, Independent Registered Public Accounting
Firm.
|
*31.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) and rule 15d-14(a)
of the Securities Exchange Act, as
amended.
|
*31.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) and rule 15d-14(a)
of the Securities Exchange Act, as
amended.
|
*32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of
2002
|
*32.2
|
Certification
of Chief Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|