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What changed in DXP ENTERPRISES INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of DXP ENTERPRISES INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+207 added−203 removedSource: 10-K (2025-03-10) vs 10-K (2024-03-11)

Top changes in DXP ENTERPRISES INC's 2024 10-K

207 paragraphs added · 203 removed · 152 edited across 6 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

62 edited+25 added−12 removed58 unchanged
Biggest changeConsolidated Results of Operations Twelve Months Ended December 31, 2023 % 2022 % 2021 % ( in millions, except percentages and per share amounts ) Sales $ 1,678.6 100.0 $ 1,480.8 100.0 $ 1,113.9 100.0 Cost of sales 1,173.3 69.9 1,058.8 71.5 785.4 70.5 Gross profit 505.3 30.1 422.0 28.5 328.5 29.5 Selling, general and administrative expenses 366.6 21.8 324.3 21.9 288.6 25.9 Income from operations 138.7 8.3 97.7 6.6 39.9 3.6 Other (income) expense, net (1.4) (0.1) 2.7 0.2 (0.4) — Interest expense 53.1 3.2 29.1 2.0 21.1 1.9 Income before income taxes 87.0 5.2 65.9 4.5 19.2 1.7 Provision for income tax expense 18.1 1.1 17.8 1.2 3.4 0.3 Net income 68.9 4.1 48.1 3.2 15.8 1.4 Net loss attributable to noncontrolling interest — — (0.1) — (0.7) (0.1) Net income attributable to DXP Enterprises, Inc. $ 68.9 4.1 $ 48.2 3.3 $ 16.5 1.5 Earning per share: Basic $ 4.07 $ 2.58 $ 0.87 Diluted $ 3.89 $ 2.47 $ 0.83 Year Ended December 31, 2023 compared to Year Ended December 31, 2022 SALES.
Biggest changeOur strategies to increase productivity include consolidated purchasing programs, centralizing product distribution, customer service and inside sales functions, and using information technology to increase employee productivity. 34 Table of Contents Consolidated Results of Operations Twelve Months Ended December 31, 2024 % 2023 % 2022 % ( in millions, except percentages and per share amounts ) Sales $ 1,802.0 100.0 $ 1,678.6 100.0 $ 1,480.8 100.0 Cost of sales 1,245.8 69.1 1,173.3 69.9 1,058.8 71.5 Gross profit 556.2 30.9 505.3 30.1 422.0 28.5 Selling, general and administrative expenses 410.9 22.8 366.6 21.8 324.3 21.9 Income from operations 145.3 8.1 138.7 8.3 97.7 6.6 Interest expense 63.9 3.5 53.1 3.2 29.1 2.0 Other (income) expense, net (3.5) (0.2) (1.4) (0.1) 2.7 0.2 Income before income taxes 84.9 4.7 87.0 5.2 65.9 4.5 Provision for income tax expense 14.5 0.8 18.1 1.1 17.8 1.2 Net income 70.4 3.9 68.9 4.1 48.1 3.2 Net loss attributable to noncontrolling interest — — — — (0.1) — Net income attributable to DXP Enterprises, Inc. $ 70.4 3.9 $ 68.9 4.1 $ 48.2 3.3 Earning per share: Basic $ 4.44 $ 4.07 $ 2.58 Diluted $ 4.22 $ 3.89 $ 2.47 Year Ended December 31, 2024 compared to Year Ended December 31, 2023 SALES.
We define and calculate Adjusted EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, amortization minus stock-based compensation expense, non-controlling interest before taxes and all other non-cash charges, adjustments, and non-recurring items.
We define and calculate Adjusted EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, amortization plus stock-based compensation expense, non-controlling interest before taxes and all other non-cash charges, adjustments, and non-recurring items.
GAAP business metrics may be calculated in a different manner than similarly titled metrics used by other companies. See “Non-U.S. GAAP Financial Measures and Reconciliations” for additional information on non-U.S. GAAP financial measures and a reconciliation to the most comparable U.S.
Our key non-U.S. GAAP business metrics may be calculated in a different manner than similarly titled metrics used by other companies. See “Non-U.S. GAAP Financial Measures and Reconciliations” for additional information on non-U.S. GAAP financial measures and a reconciliation to the most comparable U.S. GAAP measures.
We do not expect that there will be material change in the future estimates or assumptions we use to complete the purchase price allocation and estimate the fair values of acquired assets and liabilities for the acquisitions completed in fiscal year 2023.
We do not expect that there will be material change in the future estimates or assumptions we use to complete the purchase price allocation and estimate the fair values of acquired assets and liabilities for the acquisitions completed in fiscal year 2024.
With few exceptions, the Company is no longer subject to U. S. federal, state and local tax examination by tax authorities for years prior to 2015. The Company's policy is to recognize interest related to unrecognized tax benefits as interest expense and penalties as operating expenses.
With few exceptions, the Company is no longer subject to U. S. federal, state and local tax examination by tax authorities for years prior to 2016. The Company's policy is to recognize interest related to unrecognized tax benefits as interest expense and penalties as operating expenses.
Customer demand was generally healthy throughout fiscal 2023, resulting in industry expected volume growth, complemented by additional pricing actions taken by the Company's vendors after strong pricing action in 2022, which ultimately, gets passed on to customers.
Customer demand was generally healthy throughout fiscal 2024, resulting in industry expected volume growth, complemented by additional pricing actions taken by the Company's vendors after strong pricing action in 2022 and 2023, which ultimately, gets passed on to customers.
Our effective tax rate in a given period could be impacted if, upon final resolution with taxing authorities, we prevail on positions for which unrecognized tax benefits have been accrued, or are required to pay amounts in excess of accrued unrecognized tax benefits. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states.
Our effective tax rate in a given period could be impacted if, upon final resolution with taxing authorities, we prevail on positions for which unrecognized tax benefits have been accrued, or are required to pay amounts in excess of accrued unrecognized tax benefits. 43 Table of Contents The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states.
Compared to the U.S. statutory rate for the twelve months ended December 31, 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 twelve months ended December 31, 2024, 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.
However, these payment terms are extended in select cases and customers may not pay within stated trade terms. 36 Table of Contents The Company has trade receivables from a diversified customer base located primarily in the Rocky Mountain, Northeastern, Midwestern, Southeastern and Southwestern regions of the U.S., and Canada. The Company believes no significant concentration of credit risk exists.
However, these payment terms are extended in select cases and customers may not pay within stated trade terms. The Company has trade receivables from a diversified customer base located primarily in the Rocky Mountain, Northeastern, Midwestern, Southeastern and Southwestern regions of the U.S., and Canada. The Company believes no significant concentration of credit risk exists.
Additionally, as part of the market multiples approach, the Company utilizes market data from publicly traded entities whose businesses operate in industries comparable to the Company’s reporting units, adjusted for certain factors that increase comparability. 37 Table of Contents The Company cannot predict the occurrence of events or circumstances that could adversely affect the fair value of goodwill.
Additionally, as part of the market multiples approach, the Company utilizes market data from publicly traded entities whose businesses operate in industries comparable to the Company’s reporting units, adjusted for certain factors that increase comparability. The Company cannot predict the occurrence of events or circumstances that could adversely affect the fair value of goodwill.
As our operations have generally stabilized from the COVID-19 pandemic, we have seen growth from our supportive served end-markets and our focus on organic and inorganic sales growth. Our sales volume is expected to deliver sustainable and healthy growth, while our diversification efforts have unlocked gains in margins, cash flow and overall organizational efficiency.
As our operations have generally stabilized from the COVID-19 pandemic and related inflationary pressures, we have seen growth from our supportive served end-markets and our focus on organic and inorganic sales growth. Our sales volume is expected to deliver sustainable and healthy growth, while our diversification efforts have unlocked gains in margins, cash flow and overall organizational efficiency.
Organic Sales per Business Days We define and calculate Organic Sales per Business Day as Organic Sales divided by the number of Business Days in the relevant reporting period. EBITDA and Adjusted EBITDA We define and calculate EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, amortization, and non-controlling interest.
Organic Sales per Business Days We define and calculate Organic Sales per Business Day as Organic Sales divided by the number of Business Days in the relevant reporting period. 32 Table of Contents EBITDA and Adjusted EBITDA We define and calculate EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, amortization, and non-controlling interest.
As such, some of the 2023 sales increase is the result of increases in price with increases in volume as well as the contribution from acquisitions and the related sales of rotating equipment and air compressors.
As such, some of the 2024 sales increase is the result of increases in price with increases in volume as well as the contribution from acquisitions and the related sales of rotating equipment and air compressors.
We identify the impact of all other non-cash charges, adjustments and non-recurring items because we believe these items do not directly reflect our underlying operations. 29 Table of Contents EBITDA Margin and Adjusted EBITDA Margin We define and calculate EBITDA Margin as EBITDA divided by sales. We define and calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by sales.
We identify the impact of all other non-cash charges, adjustments and non-recurring items because we believe these items do not directly reflect our underlying operations. EBITDA Margin and Adjusted EBITDA Margin We define and calculate EBITDA Margin as EBITDA divided by sales. We define and calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by sales.
The historical loss rates for each respective age bucket are then adjusted for current conditions using reasonable and supportable data points. The overall allowance is adjusted accordingly based upon historical experience and economic factors that impact our business and customers. At December 31, 2023, the allowance was approximately 1.8% of the gross accounts receivable.
The historical loss rates for each respective age bucket are then adjusted for current conditions using reasonable and supportable data points. The overall allowance is adjusted accordingly based upon historical experience and economic factors that impact our business and customers. At December 31, 2024, the allowance was approximately 1.5% of the gross accounts receivable.
The Company assigns the carrying value of these intangible assets to its "reporting units" and applies the test for goodwill at the reporting unit level. A reporting unit is defined as an operating segment or one level below a segment (a "component") if the component is a business and discrete information is prepared and reviewed regularly by segment management.
The Company assigns the carrying value of these intangible assets to its “reporting units” and applies the test for goodwill at the reporting unit level. A reporting unit is defined as an operating segment or one level below a segment (a “component”) if the component is a business and discrete information is prepared and reviewed regularly by segment management.
The Company's products are marketed in the U.S., Canada, Mexico, and Dubai to customers that are engaged in a variety of industries, many of which may be counter cyclical to each other.
The Company's products are marketed in the U.S., Canada, Mexico, U.A.E., and India to customers that are engaged in a variety of industries, many of which may be counter cyclical to each other.
Our Free Cash Flow, which is calculated as cash provided by operations less net purchase of property and equipment, was $94.0 million, $1.0 million and $32.8 million for years 2023, 2022 and 2021, respectively. Free Cash Flow is not a measure of liquidity under U.S. GAAP, and may not be defined and calculated by other companies in the same manner.
Our Free Cash Flow, which is calculated as cash provided by operations less net purchase of property and equipment, was $77.1 million, $94.0 million and $1.0 million for years 2024, 2023 and 2022, respectively. Free Cash Flow is not a measure of liquidity under U.S. GAAP, and may not be defined and calculated by other companies in the same manner.
S. GAAP Financial Measures and Reconciliations Organic Sales and Acquisition Sales We define and calculate organic sales to include locations and acquisitions under our ownership for at least twelve months. "Acquisition Sales" are sales from acquisitions that have been under our ownership for less than twelve months and are excluded in our calculation of Organic Sales.
Non-U. S. GAAP Financial Measures and Reconciliations Organic Sales and Acquisition Sales We define and calculate organic sales to include locations and acquisitions under our ownership for at least twelve months. “Acquisition Sales” are sales from acquisitions that have been under our ownership for less than twelve months and are excluded in our calculation of Organic Sales.
"Acquisition Sales" are sales from acquisitions that have been under our ownership for less than twelve months and are excluded in our calculation of Organic Sales. Business Days "Business Days" are days of the week, excluding Saturdays, Sundays, and holidays, that our locations are open during the year.
“Acquisition Sales” are sales from acquisitions that have been under our ownership for less than twelve months and are excluded in our calculation of Organic Sales. Business Days “Business Days” are days of the week, excluding Saturdays, Sundays, and holidays, that our locations are open during the year.
In 2024, our cash flows for investing activities will be focused on strategic initiatives, information technology software and infrastructure, general upgrades and cost reduction opportunities and we currently estimate capital expenditures to be between $10 million and $20 million, before consideration of any acquisition activity. Our sales growth strategy in recent years has focused on internal growth and acquisitions.
In 2025, our cash flows for investing activities will be focused on strategic initiatives, information technology software and infrastructure, general upgrades and cost reduction opportunities and we currently estimate capital expenditures to be between $15.0 million and $25.0 million, before consideration of any acquisition activity. Our sales growth strategy in recent years has focused on internal growth and acquisitions.
Our effective tax rate from continuing operations was a tax expense of 20.8 percent for the twelve months ended December 31, 2023, compared to a tax expense of 27.0 percent for the twelve months ended December 31, 2022.
Our effective tax rate from continuing operations was a tax expense of 17.0 percent for the twelve months ended December 31, 2024, compared to a tax expense of 20.8 percent for the twelve months ended December 31, 2023.
As a result, we may experience changes in demand within particular markets, segments and product categories as changes occur in our customers' respective markets. Key Business Metrics We regularly monitor several financial and operating metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. Our key non-U.S.
As a result, we may experience changes in demand within particular markets, segments and product categories as changes occur in our customers' respective markets. 31 Table of Contents Key Business Metrics We regularly monitor several financial and operating metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Year Ended December 31, 2022 compared to Year Ended December 31, 2021 For the full year 2022 to 2021 comparative discussion, see Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 incorporated by reference in this Annual Report on Form 10-K. 32 Table of Contents Non-U.
Year Ended December 31, 2023 compared to Year Ended December 31, 2022 For the full year 2023 to 2022 comparative discussion, see Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 incorporated by reference in this Annual Report on Form 10-K.
With our strong backlog and improved market environment, we expect to continue to see growth in 2024. Assuming a positive general macroeconomic environment and continued supportive environments in our end markets, we expect fiscal 2024 to be comparable to 2023 levels with the exception of increased acquisition activity.
With our strong backlog and improved market environment, we expect to continue to see growth in 2025. Assuming a positive general macroeconomic environment and continued supportive environments in our end markets, we expect fiscal 2025 growth to be comparable to 2024 growth metrics with the continued execution of acquisition activity.
We expect our interest expense in 2024 will be relatively higher than the amounts incurred in 2023 due to our refinancing in the fourth quarter of 2023 including the raising of an incremental $125 million. 30 Table of Contents We expect to generate sufficient cash from operations and have sufficient capacity under our ABL credit facility to fund any working capital, capital expenditures, share repurchases, and debt payments in 2024.
We expect our interest expense in 2025 will be relatively higher than the amounts incurred in 2024 due to our refinancing in the fourth quarter of 2024. We expect to generate sufficient cash from operations and have sufficient capacity under our ABL credit facility to fund any working capital, capital expenditures, share repurchases, and debt payments in 2025.
Income from operations for the year ended December 31, 2023 increased by $41.0 million to $138.7 million from $97.8 million in the prior year's corresponding period. This increase in operating income is primarily related to the aforementioned increased business activity across all segments. INTEREST EXPENSE.
Income from operations for the year ended December 31, 2024 increased by $6.7 million to $145.4 million from $138.7 million in the prior year's corresponding period. This increase in operating income is primarily related to the aforementioned increased business activity across all segments. INTEREST EXPENSE.
Free Cash Flow should not be considered in isolation or as an alternative to net cash provided by operating activities. Free Cash Flow reconciles to the most directly comparable U.S. GAAP financial measure of cash flows from operations.
Free Cash Flow should not be considered in isolation or as an alternative to net cash provided by operating activities. Free Cash Flow reconciles to the most directly comparable U.S.
However, we may require additional debt outside of our credit facilities or equity financing to fund potential acquisitions. Such additional financings may include additional bank debt or the public or private sale of debt or equity securities. In connection with any such financing, we may issue securities that substantially dilute the interests of our shareholders.
Such additional financings may include additional bank debt or the public or private sale of debt or equity securities. In connection with any such financing, we may issue securities that substantially dilute the interests of our shareholders.
For the year ended December 31, 2023, the Company repurchased approximately $56.2 million worth of outstanding shares compared to $47.9 million worth of outstanding shares for the year ended December 31, 2022. The net inflow of cash from financing activities in 2023 benefited from refinancing our existing Senior Secured Term Loan B.
For the year ended December 31, 2024, the Company repurchased approximately $29.0 million worth of outstanding shares compared to $56.2 million worth of outstanding shares for the year ended December 31, 2023. The net inflow of cash from financing activities in 2024 was a benefit driven by the refinancing of our existing Senior Secured Term Loan B.
The increase in the gross profit percentage is primarily the result of an approximate 147 basis points and 349 basis points increase in the gross profit percentage in our SC and IPS segments, respectively, partially offset by an approximate 21 basis points decrease in our SCS segment. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A").
Additionally, the increase in the gross profit percentage is primarily the result of an approximate 83 basis points and 114 basis points increase in the gross profit percentage in our SC and SCS segments, respectively, partially offset by an approximate 148 basis points decrease in our IPS segment. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (“SG&A”).
The $100.3 million increase in the amount of cash generated between the two periods was primarily driven by the collections of receivables associated with trade accounts receivable partially offset by decreased inventory purchases and accrued expenses as compared to the prior period.
The $4.0 million decrease in the amount of cash generated between the two periods was primarily driven by an increase in operating assets including trade accounts receivable partially offset by decreased inventory purchases and accrued expenses as compared to the prior period.
Such indemnification obligations may not be subject to maximum loss clauses. Historically, payments made related to these indemnities have been immaterial. DISCUSSION OF CRITICAL ACCOUNTING ESTIMATES The Consolidated Financial Statements of the Company are prepared in accordance with U.S.
Historically, payments made related to these indemnities have been immaterial. 40 Table of Contents DISCUSSION OF CRITICAL ACCOUNTING ESTIMATES The Consolidated Financial Statements of the Company are prepared in accordance with U.S.
As a distributor of MRO products and services, we require significant amounts of working capital to fund inventories and accounts receivables. Additional cash is required for capital items for information technology, warehouse equipment, leasehold improvements, pump manufacturing equipment and safety services equipment. We also require cash to pay our lease obligations, fund project work-in-process and to service our debt.
Additional cash is required for capital items for information technology, warehouse equipment, leasehold improvements, pump manufacturing and safety services equipment. We also require cash to pay our lease obligations, fund project work-in-process and to service our debt. Cash As of December 31, 2024 and 2023, we had cash of $148.3 million and $173.1 million, respectively.
Quantitative and Qualitative Disclosure about Market Risk Free Cash Flow We believe Free Cash Flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to fund acquisitions, make investments, repay debt obligations, repurchase shares of the Company's common stock, and for certain other activities.
The following table summarizes the Company’s credit ratings as of December 31, 2024: Corporate Senior Secured Moody’s B1 B2 S&P B B Free Cash Flow We believe Free Cash Flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to fund acquisitions, make investments, repay debt obligations, repurchase shares of the Company's common stock, and for other activities.
Sales for the Service Centers segment increased by $135.7 million, or 13.4% for the year ended December 31, 2023, compared to the year ended December 31, 2022. Sales from acquisitions for the SC segment was $19.3 million during the twelve months ended December 31, 2023.
Sales for the IPS segment increased by $104.3 million, or 47.7% for the year ended December 31, 2024, compared to the year ended December 31, 2023. Sales from acquisitions for the IPS segment increased $47.8 million during the twelve months ended December 31, 2024.
The impact of changes in key assumptions is described in Note 5 - Fair Value of Financial Assets and Liabilities . 38 Table of Contents Income Taxes The Company utilizes the asset and liability method of accounting for income taxes.
A change in any of these assumptions could produce a different fair value, which could have a material impact on the results from operations. The impact of changes in key assumptions is described in Note 5 - Fair Value of Financial Assets and Liabilities . Income Taxes The Company utilizes the asset and liability method of accounting for income taxes.
The following table summarizes our net cash flows provided by (used in) operating activities, investing activities, financing activities for the periods presented ( in thousands, except percentages ): Twelve Months Ended December 31, 2023 2022 Change Change % Net cash provided by (used in): Operating activities $ 106,222 $ 5,894 $ 100,328 1,702 % Investing activities (22,647) (53,422) 30,775 (58) % Financing activities 43,579 44,312 (733) (2) % Effect of foreign currency (60) 253 (313) (124) % Net change in cash and restricted cash $ 127,094 $ (2,963) $ 130,057 (4,389) % Operating Activities The Company generated $106.2 million of cash in operating activities during the year ended December 31, 2023 compared to generating $5.9 million of cash during the prior year's corresponding period.
Cash Flows The following table summarizes our net cash flows provided by (used in) operating activities, investing activities, financing activities for the periods presented ( in thousands, except percentages ): Twelve Months Ended December 31, 2024 2023 Change Change % Net cash provided by (used in): Operating activities $ 102,211 $ 106,222 $ (4,011) (4) % Investing activities (181,692) (22,647) (159,045) 702 % Financing activities 56,803 43,579 13,224 30 % Effect of foreign currency (2,122) (60) (2,062) 3,437 % Net change in cash and restricted cash $ (24,800) $ 127,094 $ (151,894) (120) % Operating Activities The Company generated $102.2 million of cash in operating activities during the year ended December 31, 2024 compared to generating $106.2 million of cash during the prior year's corresponding period.
Our purchase price allocation methodology contains uncertainties because it requires management to make assumptions and to apply judgment to estimate the fair value of acquired assets and liabilities.
The fair value estimates are developed using the best information available. Third party valuation specialists assist in valuing the Company’s significant acquisitions. Our purchase price allocation methodology contains uncertainties because it requires management to make assumptions and to apply judgment to estimate the fair value of acquired assets and liabilities.
Gross profit as a percentage of sales for the twelve months ended December 31, 2023 increased by approximately 160 basis points from the prior year's corresponding period.
Gross profit as a percentage of sales for the twelve months ended December 31, 2024 increased by approximately 77 basis points from the prior year's corresponding period. The primary driver was an increase in contribution from IPS sales, going from 13.0% of consolidated sales in 2023 to 17.9% of sales in 2024.
Investing Activities For the year ended December 31, 2023, net cash used in investing activities was $22.6 million compared to $53.4 million used in the corresponding period in 2022.
Financing Activities For the year ended December 31, 2024, net cash generated in financing activities was $56.8 million, compared to net cash generated in financing activities of $43.6 million for the corresponding period in 2023.
GAAP financial measure (in thousands) : Twelve Months Ended December 31, 2023 2022 2021 Net cash provided by operating activities $ 106,222 $ 5,894 $ 37,089 Less: purchases of property and equipment, net (12,263) (4,916) (4,330) Free Cash Flow $ 93,959 $ 978 $ 32,759 Liquidity and Capital Resources General Overview As of December 31, 2023, we had available cash of $173.1 million and credit facility availability of $132.1 million.
GAAP financial measure (in thousands) : Twelve Months Ended December 31, 2024 2023 2022 Net cash provided by operating activities $ 102,211 $ 106,222 $ 5,894 Less: purchases of property and equipment, net (25,068) (12,263) (4,916) Free Cash Flow $ 77,143 $ 93,959 $ 978 37 Table of Contents Liquidity and Capital Resources General Overview We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities.
GAAP financial measure (in thousands) : Twelve Months Ended December 31, 2023 2022 2021 Net income attributable to DXP Enterprises, Inc. $ 68,812 $ 48,155 $ 16,496 Less: Net loss attributable to non-controlling interest (NCI) — (53) (745) Plus: Interest expense 53,146 29,135 21,089 Plus: Provision for income tax expense 18,119 17,799 3,431 Plus: Depreciation and amortization 30,105 28,500 27,143 EBITDA $ 170,182 $ 123,536 $ 67,414 Plus: NCI income before tax — 227 993 Plus: other non-recurring items (1) 1,051 1,193 — Plus: stock compensation expense 3,072 1,850 1,823 Adjusted EBITDA $ 174,305 $ 126,806 $ 70,230 Operating Income Margin 8.3 % 6.6 % 3.6 % EBITDA Margin 10.1 % 8.3 % 6.1 % Adjusted EBITDA Margin 10.4 % 8.6 % 6.3 % (1) Other non-recurring items primarily include the loss associated with closing an international location for the year ended December 31, 2023 and the loss associated with the sale of a variable interest entity (VIE) for the year ended December 31, 2022. 33 Table of Contents Free Cash Flow We define and calculate free cash flow as net cash provided by operating activities less net purchases of property and equipment.
GAAP financial measure (in thousands) : Twelve Months Ended December 31, 2024 2023 2022 Net income attributable to DXP Enterprises, Inc. $ 70,489 $ 68,812 $ 48,155 Less: Net loss attributable to non-controlling interest (NCI) — — (53) Plus: Interest expense 63,927 53,146 29,135 Plus: Provision for income tax expense 14,483 18,119 17,799 Plus: Depreciation and amortization 33,405 30,105 28,500 EBITDA $ 182,304 $ 170,182 $ 123,536 Plus: NCI income before tax — — 227 Plus: other non-recurring items (1) 4,292 1,051 1,193 Plus: stock compensation expense 4,714 3,072 1,850 Adjusted EBITDA $ 191,310 $ 174,305 $ 126,806 Operating Income Margin 8.1 % 8.3 % 6.6 % EBITDA Margin 10.1 % 10.1 % 8.3 % Adjusted EBITDA Margin 10.6 % 10.4 % 8.6 % (1) Other non-recurring items includes unique acquisition integration costs and other non-cash, non-recurring costs.
Impairment of Goodwill, Other Intangible Assets, and Long-Lived Assets The Company tests goodwill and other intangible assets for impairment annually on October 1 st and when events or changes in circumstances indicate that the carrying amount may not be recoverable.
While credit losses have historically been within expectations and the provisions established, should actual write-offs differ from estimates, revisions to the allowance would be required. 41 Table of Contents Impairment of Goodwill, Other Intangible Assets, and Long-Lived Assets The Company tests goodwill and other intangible assets for impairment annually on October 1 st and when events or changes in circumstances indicate that the carrying amount may not be recoverable.
GAAP measures. 28 Table of Contents Twelve Months Ended December 31, 2023 2022 2021 Sales by Business Segment ( in thousands, except percentages and days) Service Centers $ 1,145,082 $ 1,009,356 $ 816,496 Innovative Pumping Solutions 273,150 231,102 139,591 Supply Chain Services 260,368 240,374 157,834 Total DXP Sales $ 1,678,600 $ 1,480,832 $ 1,113,921 Acquisition Sales $ 33,078 $ 41,527 $ 147,472 Organic Sales 1,645,522 1,439,305 966,449 Business Days 252 253 251 Sales per Business Day $ 6,661 $ 5,853 $ 4,438 Organic Sales per Business Day 6,530 5,689 3,850 Gross Profit $ 505,291 $ 422,038 $ 328,506 Gross Profit Margin 30.1 % 28.5 % 29.5 % EBITDA $ 170,182 $ 123,535 $ 67,415 EBITDA Margin 10.1 % 8.3 % 6.1 % Adjusted EBITDA $ 174,305 $ 126,805 $ 70,231 Adjusted EBITDA Margin 10.4 % 8.6 % 6.3 % Free Cash Flow $ 93,959 $ 980 $ 32,759 Organic Sales and Acquisition Sales We define and calculate organic sales to include locations and acquisitions under our ownership for at least twelve months.
Twelve Months Ended December 31, 2024 2023 2022 Sales by Business Segment ( in thousands, except percentages and days) Service Centers $ 1,222,599 $ 1,199,501 $ 1,041,462 Innovative Pumping Solutions 323,026 218,731 198,895 Supply Chain Services 256,415 260,368 240,475 Total DXP Sales $ 1,802,040 $ 1,678,600 $ 1,480,832 Acquisition Sales $ 98,500 $ 33,078 $ 41,527 Organic Sales $ 1,703,540 $ 1,645,522 $ 1,439,305 Business Days 253 252 253 Sales per Business Day $ 7,123 $ 6,661 $ 5,853 Organic Sales per Business Day $ 6,733 $ 6,530 $ 5,689 Gross Profit $ 556,277 $ 505,291 $ 422,038 Gross Profit Margin 30.9 % 30.1 % 28.5 % EBITDA $ 182,304 $ 170,182 $ 123,536 EBITDA Margin 10.1 % 10.1 % 8.3 % Adjusted EBITDA $ 191,310 $ 174,305 $ 126,806 Adjusted EBITDA Margin 10.6 % 10.4 % 8.6 % Free Cash Flow $ 77,143 $ 93,959 $ 978 Organic Sales and Acquisition Sales We define and calculate organic sales to include locations and acquisitions under our ownership for at least twelve months.
The following table sets forth the reconciliation of Free Cash Flow to the most comparable U.S.
Free Cash Flow We define and calculate free cash flow as net cash provided by operating activities less net purchases of property and equipment. The following table sets forth the reconciliation of Free Cash Flow to the most comparable U.S.
Sales for the year ended December 31, 2023 increased $197.8 million, or 13.4%, to approximately $1.7 billion from $1.5 billion for the prior corresponding period.
The Company continues to execute various strategies previously implemented to help mitigate the impact of these economic disruptors. Sales for the year ended December 31, 2024 increased $123.4 million, or 7.4%, to approximately $1.8 billion from $1.7 billion for the prior corresponding period.
Sales for the year ended December 31, 2023 increased $197.8 million, or 13.4%, to approximately $1.7 billion from $1.5 billion for the year ended December 31, 2022. This sales increase is the result of an increase in sales in our SC, IPS and SCS segments of $135.7 million, $42.0 million and $20.0 million, respectively.
Sales for the year ended December 31, 2024 increased $123.4 million, or 7.4%, to approximately $1.8 billion from $1.7 billion for the year ended December 31, 2023. The sales increase was primarily due to new acquisitions within our SC and IPS segments during the year ended December 31, 2024.
Both of the Company's facilities are subject to a variable interest rate for the twelve months ended December 31, 2023. PROVISION FOR INCOME TAX EXPENSE.
Interest expense for the year ended December 31, 2024 increased $10.8 million compared to the prior year's corresponding period, primarily due to an increase outstanding borrowings on the Term Loan B. Both of the Company's facilities are subject to a variable interest rate for the twelve months ended December 31, 2024. PROVISION FOR INCOME TAX EXPENSE.
Debt issuance costs associated with the amendment of our new Term Loan B was $12.1 million for the year ended December 31, 2023.
Debt issuance costs associated with the amendment of our new Term Loan B was $1.8 million for the year ended December 31, 2024. 38 Table of Contents During the twelve months ended December 31, 2024 we repurchased 0.6 million shares of the Company's common stock for approximately $28.8 million compared to 1.7 million shares of the Company's stock for approximately $54.7 million for the twelve months ended December 31, 2023.
Purchase Accounting The Company estimates the fair value of assets, including property, machinery and equipment and their related useful lives and salvage values, intangibles and liabilities when allocating the purchase price of an acquisition. The fair value estimates are developed using the best information available. Third party valuation specialists assist in valuing the Company’s significant acquisitions.
A significant change in an estimate on several projects could have a material effect on our financial position and results of operations. 42 Table of Contents Purchase Accounting The Company estimates the fair value of assets, including property, machinery and equipment and their related useful lives and salvage values, intangibles and liabilities when allocating the purchase price of an acquisition.
At December 31, 2023, our total outstanding debt was $548.6 million, or 59.0% of total capitalization (total debt plus shareholders’ equity) of $929.5 million. All $548.6 million of this outstanding debt bears interest at various floating rates. See Item 7A.
We believe the Company has adequate funding to support its working capital needs within the business. Debt At December 31, 2024, our total outstanding debt was $648.9 million, or 60.5% of total capitalization (total debt plus shareholders’ equity) of $1.1 billion. $647.9 million of this outstanding debt bears interest at various floating rates. See Item 7A.
The following table sets forth the reconciliation of net cash provided by operating activities to Free Cash Flow (in thousands) : Twelve Months Ended December 31, 2023 2022 2021 Net cash provided by operating activities $ 106,222 $ 5,894 $ 37,089 Less: Purchase of property and equipment, net 12,263 4,916 4,330 Free Cash Flow $ 93,959 $ 978 $ 32,759 35 Table of Contents ABL Revolver and Senior Secured Term Loan Borrowings (in thousands): December 31, 2023 2022 Current portion of long-term debt $ 5,500 $ 4,369 Long-term debt 543,125 423,764 Total debt $ 548,625 $ 428,133 We believe our cash generated from operations will meet our normal working capital needs during the next twelve months.
GAAP financial measure of cash flows from operations. 39 Table of Contents The following table sets forth the reconciliation of net cash provided by operating activities to Free Cash Flow (in thousands): Twelve Months Ended December 31, 2024 2023 2022 Net cash provided by operating activities $ 102,211 $ 106,222 $ 5,894 Less: Purchase of property and equipment, net 25,068 12,263 4,916 Free Cash Flow $ 77,143 $ 93,959 $ 978 Uses of Liquidity Internally generated cash flows are the primary source of working capital and growth initiatives, including acquisitions and growth capital expenditures.
Borrowing Capacity (in thousands): The following table summarizes the amount of borrowing capacity under our ABL Revolver as follows: December 31, 2023 2022 Total borrowing capacity $ 135,000 $ 135,000 Less: Amount drawn — — Less: Outstanding letters of credit 2,945 2,620 Total amount available $ 132,055 $ 132,380 Indemnification In the ordinary course of business, the Company enters into contractual arrangements under which the Company may agree to indemnify customers from any losses incurred relating to the services we perform.
The following table summarizes the amount of borrowing capacity under our ABL Revolver as follows (in thousands) : December 31, 2024 2023 Total borrowing capacity $ 135,000 $ 135,000 Less: Amount drawn — — Less: Outstanding letters of credit 9,354 2,945 Total amount available $ 125,646 $ 132,055 At December 31, 2024, the Company had $274.0 million of liquidity including $148.3 million in cash and $125.6 million in availability under the ABL Revolver.
Management continues to monitor and update project cost estimates quarterly for all open contracts. A significant change in an estimate on several projects could have a material effect on our financial position and results of operations.
Management continues to monitor and update project cost estimates quarterly for all open contracts.
Sales for the IPS segment increased by $42.0 million, or 18.2% for the year ended December 31, 2023, compared to the year ended December 31, 2022. Sales from acquisitions for the IPS segment was $13.8 million during the twelve months ended December 31, 2023. Supply Chain Services Segment.
For additional information, please refer to Note 20. Segment Reporting . Service Centers Segment. Sales for the Service Centers segment increased by $23.1 million, or 1.9% for the year ended December 31, 2024, compared to the year ended December 31, 2023. Sales from acquisitions for the SC segment increased by $17.7 million during the twelve months ended December 31, 2024.
Below are readings for the fourth quarter versus the full year average: Index Reading Period MCU PMI IP MBI Active Drilling Rigs (1) October 78.6 46.7 102.4 45.4 1,777 November 78.8 46.6 102.7 43.4 1,794 December 78.7 47.1 102.7 44.3 1,739 Fiscal 2023 Q4 average 78.7 46.8 102.6 44.4 1,770 Fiscal 2023 average 79.3 47.1 102.8 46.5 1,814 Fiscal 2022 average 79.7 53.5 103.9 53.9 1,747 Fiscal 2021 average 75.4 60.6 100.5 59.7 1,361 (1).
Below are readings for the fourth quarter versus the full year average: Index Reading Period MCU PMI IP MBI Active Drilling Rigs (1) October 77.0 46.5 102.1 43.9 1,754 November 77.0 48.4 102.3 44.7 1,708 December 77.6 49.3 103.2 46.9 1,660 Fiscal 2024 Q4 average 77.2 48.1 102.5 45.2 1,707 Fiscal 2024 average 77.6 48.3 102.6 45.7 1,735 Fiscal 2023 average 79.3 47.1 102.8 46.5 1,814 Fiscal 2022 average 79.7 53.5 103.9 53.9 1,747 (1) From Baker Hughes’ Worldwide Rig Counts - Current Data The continued disruption in economic markets due to inflation, changing interest rates, tariffs, trade disputes, business interruptions due to natural disasters and changes in weather patterns, employee shortages, and supply chain issues, all pose challenges which may adversely affect our future performance.
SG&A for the year ended December 31, 2023 increased by approximately $42.3 million, or 13.0%, to $366.6 million from $324.3 million for the prior year's corresponding period. The increase in SG&A is primarily the result of increased payroll, incentive compensation and related taxes and 401(k) expenses as a result of increased business activity. INCOME FROM OPERATIONS.
Excluding acquisitions, the increase in SG&A is primarily the result of increased professional fees, payroll expenses, incentive compensation and 401(k) expenses as a result of an increase in headcount during the period. INCOME FROM OPERATIONS.
This decrease of $30.8 million was primarily driven by a reduction in the total purchase price paid for acquisitions during 2023 of $10.4 million compared to $48.5 million for acquisitions in 2022. 34 Table of Contents Financing Activities For the year ended December 31, 2023, net cash generated in financing activities was $43.6 million, compared to net cash generated in financing activities of $44.3 million for the corresponding period in 2022.
Investing Activities For the year ended December 31, 2024, net cash used in investing activities was $181.7 million compared to $22.6 million used in the corresponding period in 2023. The increase of $159.0 million was primarily driven by an increase in acquisition activities during 2024 compared to 2023.
Sales for the SCS segment increased by $20.0 million, or 8.3%, for the year ended December 31, 2023, compared to the year ended December 31, 2022. The improved sales are primarily related to the addition of a new customer in the diversified chemicals market. GROSS PROFIT.
Sales for the SCS segment decreased by $4.0 million, or 1.5%, for the year ended December 31, 2024, compared to the year ended December 31, 2023. The decrease in sales was primarily the result of decreases in sales in our oil & gas, resin, and power end-markets. GROSS PROFIT.
We have a $135.0 million asset backed revolving line of credit (the "ABL Revolver"), partially offset by letters of credit of $2.9 million. Our primary source of capital is cash flow from operations, supplemented as necessary by Company shares, bank borrowings or other sources of debt.
Our primary source of capital is cash flow from operations, supplemented as necessary by bank borrowings or other sources of debt and existing cash balances. As a distributor of MRO products and services, we require certain amounts of working capital to primarily fund inventories and accounts receivables.
GAAP financial measure (in thousands) : Twelve Months Ended December 31, 2023 2022 2021 Service Centers $ 1,145,082 $ 1,009,356 $ 816,496 Innovative Pumping Solutions 273,150 231,102 139,591 Supply Chain Services 260,368 240,374 157,834 Total DXP Sales 1,678,600 1,480,832 1,113,921 Acquisition Sales 33,078 41,527 147,472 Organic Sales $ 1,645,522 $ 1,439,305 $ 966,449 EBITDA, Adjusted EBITDA, EBITDA Margin, and Adjusted EBITDA Margin We define and calculate EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, amortization, and non-controlling interest.
GAAP financial measure (in thousands) : Twelve Months Ended December 31, 2024 2023 (1) 2022 (1) Service Centers $ 1,222,599 $ 1,199,501 $ 1,041,462 Innovative Pumping Solutions 323,026 218,731 198,895 Supply Chain Services 256,415 260,368 240,475 Total DXP Sales $ 1,802,040 $ 1,678,600 $ 1,480,832 Acquisition Sales $ 98,500 $ 33,078 $ 41,527 Organic Sales $ 1,703,540 $ 1,645,522 $ 1,439,305 (1) Prior period segment disclosures have been recast.
Removed
From Baker Hughes’ Worldwide Rig Counts - Current Data During 2023, the growth rate of the general economy improved, as the macro economy and business cycle began to normalize relative to the pandemic related years of 2020 and 2021.
Added
However, the Company cannot reasonably estimate whether these strategies will help mitigate the impact of these economic disruptors in the future. 33 Table of Contents The Company’s consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and related disclosures as of the date of the condensed consolidated financial statements.
Removed
Our strategies to increase productivity include consolidated purchasing programs, centralizing product distribution, customer service and inside sales functions, and using information technology to increase employee productivity.
Added
The Company considered the impact of economic trends on the assumptions and estimates used in preparing the consolidated financial statements. In the opinion of management, all material adjustments necessary for a fair presentation of the Company’s financial results for the year have been made.
Removed
The fluctuations in sales are further explained in our business segment discussions below. 31 Table of Contents Years Ended December 31 2023 2022 Change Change % Sales by Business Segment (in thousands, except percentages) Service Centers $ 1,145,082 $ 1,009,356 $ 135,726 13.4 % Innovative Pumping Solutions 273,150 231,102 42,048 18.2 % Supply Chain Services 260,368 240,374 19,994 8.3 % Total Sales $ 1,678,600 $ 1,480,832 $ 197,768 13.4 % Service Centers Segment.
Added
These adjustments are of a normal recurring nature but are complicated by the continued uncertainty surrounding these macro economic trends. The severity, magnitude and duration of certain economic trends continue to be uncertain and are difficult to predict. Therefore, our accounting estimates and assumptions may change over time in response to economic trends and may change materially in future periods.
Removed
This sales increase is primarily the result of increased sales of rotating equipment and bearings product lines to customers engaged in operating and maintenance services in the general industrial, diversified chemical, and oil and gas markets in connection with increased capital spending by oil and gas producers. Innovative Pumping Solutions Segment.
Added
The extent to which changing interest rates, inflation and other economic trends will continue to impact the Company’s business, financial condition and results of operations is uncertain. Therefore, we cannot reasonably estimate the full future impacts of these matters at this time.
Removed
Interest expense for the year ended December 31, 2023 increased $24.0 million compared to the prior year's corresponding period, primarily due to incurring higher than average interest rates during the year due and an increased borrowing base on the Term Loan B.
Added
Sales in our SC and IPS segments increased $23.1 million and $104.3 million, respectively, offset by a decrease in sales in our SCS segment of $4.0 million. The fluctuations in sales are further explained in our business segment discussions below.
Removed
During the twelve months ended December 31, 2023 we repurchased 1.7 million shares of the Company's common stock for approximately $54.7 million compared to 1.3 million shares of the Company's stock for approximately $35.2 million for the twelve months ended December 31, 2022.
Added
Years Ended December 31 (in thousands, except percentages) 2024 % Total 2023 (1) % Total Change Change % Sales by Business Segment Service Centers $ 1,222,599 67.9 $ 1,199,501 71.5 $ 23,098 1.9 % Innovative Pumping Solutions 323,026 17.9 218,731 13.0 104,295 47.7 % Supply Chain Services 256,415 14.2 260,368 15.5 (3,953) (1.5) % Total Sales $ 1,802,040 100.0 $ 1,678,600 100.0 $ 123,440 7.4 % (1) Prior period segment disclosures have been recast.
Removed
On December 15, 2022, the Company announced a new share repurchase program pursuant to which we may repurchase up to $85.0 million worth, or 2.8 million shares of the Company's outstanding common stock in the open market or through privately negotiated transactions over the next 24 months.
Added
Total sales for the SC segment excluding acquisitions increased $5.4 million from the prior year's corresponding period. This sales increase was primarily due to increase in sales within our Ohio River Valley, Southwest, South Rockies, and Canada regions; partially offset by decreases in our North Rockies and Texas Gulf Coast regions. Innovative Pumping Solutions Segment.
Removed
The Company successfully completed the May 2021 repurchase program, whereby, the Company completed the repurchase of 1.5 million shares, under the 2-year program.
Added
Total sales for the IPS segment excluding acquisitions increased $56.5 million from the prior year's corresponding period.
Removed
On June 15, 2021, the Company entered into a negotiated share repurchase agreement to repurchase certain shares of its common stock from certain of its shareholders agreeing to pay sellers over four equal quarterly installments, which are presented within the purchase of treasury stock in the cash flow statement.
Added
This sales increase was primarily due to increase in sales within our water and wastewater division, our international division, and overall increases in project related jobs due to increased capital spending by oil and gas producers and the renewables sector. 35 Table of Contents Supply Chain Services Segment.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeRisk Factors," specifically the risks titled "Cybersecurity breaches and other disruptions or misuse of our network and information systems could affect our ability to conduct our business effectively.", the sophistication of cyber threats continues to increase, and the preventative actions we take to reduce the risk of cyber incidents and protect our systems and information may be insufficient.
Biggest changeRisk Factors,” specifically the risks titled “Cybersecurity breaches and other disruptions or misuse of our network and information systems could affect our ability to conduct our business effectively.”, the sophistication of cyber threats continues to increase, and the preventative actions we take to reduce the risk of cyber incidents and protect our systems and information may be insufficient.
We also engage external firms to measure our NIST CSF maturity level. 23 Table of Contents Governance Our board of directors established a standing Cybersecurity Committee, which is tasked with oversight of the Cybersecurity Program, including: (i) strategy and governance; (ii) operations; and (iii) risk management and regulatory compliance.
We also engage external firms to measure our NIST CSF maturity level. 26 Table of Contents Governance Our board of directors established a standing Cybersecurity Committee, which is tasked with oversight of the Cybersecurity Program, including: (i) strategy and governance; (ii) operations; and (iii) risk management and regulatory compliance.
Accordingly, no matter how well our controls are designed or implemented, we will not be able to anticipate all security breaches, and we may not be able to implement effective preventive measures against such security breaches in a timely manner. 24 Table of Contents
Accordingly, no matter how well our controls are designed or implemented, we will not be able to anticipate all security breaches, and we may not be able to implement effective preventive measures against such security breaches in a timely manner. 27 Table of Contents
As of the date of this report, we are not aware of any cybersecurity threats that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition. However, as discussed under "Item 1A.
As of the date of this report, we are not aware of any cybersecurity threats that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition. However, as discussed under “Item 1A.
We also utilizes internal and external audits and assessments, vulnerability testing, governance processes over outsourced service providers, active risk management and benchmarking against peers in the industry to validate our security posture.
We also utilize internal and external audits and assessments, vulnerability testing, governance processes over outsourced service providers, active risk management and benchmarking against peers in the industry to validate our security posture.
Our cybersecurity and information security framework includes risk assessment and mitigation through a threat intelligence-driven approach, application controls, and enhanced security with ransomware defense. The framework leverages the National Institute of Standards and Technology Cyber Security Framework ("NIST CSF") for measuring overall readiness to respond to cyber threats, and Sarbanes-Oxley for assessment of internal controls.
Our cybersecurity and information security framework includes risk assessment and mitigation through a threat intelligence-driven approach, application controls, and enhanced security with ransomware defense. The framework leverages the National Institute of Standards and Technology Cyber Security Framework (“NIST CSF”) for measuring overall readiness to respond to cyber threats, and Sarbanes-Oxley for assessment of internal controls.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeState/City/Province Locations State/City/Province Locations Alaska 1 North Dakota 3 Alabama 6 Ohio 5 Arkansas 1 Oklahoma 3 Arizona 2 Oregon 1 California 10 Pennsylvania 4 Colorado 5 South Dakota 1 Florida 3 Tennessee 1 Georgia 4 Texas 46 Iowa 4 Utah 1 Illinois 2 Washington 4 Indiana 2 Wisconsin 2 Kansas 2 West Virginia 1 Kentucky 1 Wyoming 2 Louisiana 14 Alberta 10 Massachusetts 1 British Columbia 1 Maryland 1 Manitoba 2 Michigan 1 New Brunswick 1 Minnesota 1 Newfoundland 1 Missouri 1 Nova Scotia 2 Montana 2 Ontario 5 Nebraska 9 Quebec 1 New Mexico 2 Saskatchewan 3 New Jersey 1 Dubai 1 New York 3 Total Locations 183 North Carolina 3 At December 31, 2023, our owned facilities ranged from 5,000 square feet to 45,000 square feet in size.
Biggest changeThe location of our Service Centers and Innovative Pumping Solutions segment facilities at the end of December 31, 2024 were as follows: State/City/Province Locations State/City/Province Locations Alaska 1 North Dakota 3 Alabama 6 Ohio 5 Arkansas 1 Oklahoma 3 Arizona 3 Oregon 1 California 11 Pennsylvania 4 Colorado 5 South Dakota 1 Florida 3 Tennessee 1 Georgia 4 Texas 48 Iowa 4 Utah 1 Illinois 2 Washington 4 Indiana 2 West Virginia 1 Kansas 2 Wisconsin 2 Kentucky 1 Wyoming 2 Louisiana 14 Alberta 10 Massachusetts 1 British Columbia 1 Maryland 2 Manitoba 2 Michigan 2 New Brunswick 1 Minnesota 1 Newfoundland 1 Missouri 1 Nova Scotia 2 Montana 2 Ontario 5 Nebraska 10 Quebec 1 New Jersey 2 Saskatchewan 3 New Mexico 2 U.A.E. 1 New York 3 India 1 North Carolina 3 Saudi Arabia 1 Total Locations 193 At December 31, 2024, the Supply Chain Services segment operated supply chain installations in 86 of our customers’ sites in 31 U.S. states and two Canadian provinces. 28 Table of Contents At December 31, 2024, our owned facilities ranged from 5,000 square feet to 45,000 square feet in size.
We believe that if the leases for any of our facilities were not renewed, other suitable facilities could be leased with no material adverse effect on our business, financial condition or results of operations. See Note 4 - Leases for additional discussion on our leases. 25 Table of Contents
We believe that if the leases for any of our facilities were not renewed, other suitable facilities could be leased with no material adverse effect on our business, financial condition or results of operations. See Note 4 - Leases for additional discussion on our leases.
At December 31, 2023, the Service Centers segment operated out of 157 service center facilities. Of these facilities, 132 were located in the U.S. in 37 states, 24 were located in 9 Canadian provinces and one was located in Dubai. The four distribution centers were located in the U.S., specifically in Texas, Montana and Nebraska.
At December 31, 2024, the Service Centers segment operated out of 157 service center facilities. Of these facilities, 132 were located in the U.S. in 38 states, 24 were located in nine Canadian provinces and one was located in the U.A.E. The four distribution centers were located in the U.S., specifically in Texas, Montana and Nebraska.
ITEM 2. Properties At December 31, 2023, we had 183 facilities which contained 157 services centers, 4 distribution centers, 16 fabrication facilities and 6 wastewater locations. Additionally, we operated out of 81 of our customers' facilities. We own seven of our facilities while the remainder of our facilities are leased.
ITEM 2. Properties At December 31, 2024, our Service Centers and Innovative Pumping Solutions segments had 193 facilities which comprised of 157 service center facilities, four distribution centers, 21 fabrication facilities and 11 wastewater locations. We own 11 of our facilities while the remainder of our facilities are leased.
At December 31, 2023, the Innovative Pumping Solutions segment operated out of 16 fabrication facilities located in seven states in the U.S., two provinces in Canada and 6 wastewater locations in the U.S.. At December 31, 2023, the Supply Chain Services segment operated supply chain installations in 81 of our customers’ facilities in 29 U.S. states and two Canadian provinces.
At December 31, 2024, the Innovative Pumping Solutions segment operated out of 21 fabrication facilities located in 12 states in the U.S., two provinces in Canada, one in India and one in Saudi Arabia. Additionally, we had 11 wastewater locations in the U.S.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeRepurchases of Common Stock The following table presents information with respect to the Company’s repurchases of its common stock during the quarter ended December 31, 2023 ( in thousands except average price paid per share ): Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ( in thousands ) October 1 - October 31 $ — $ — $ — $ 26,412 November 1 – November 30 — — — 26,412 December 1 – December 31 — — — 26,412 Total $ — $ — $ — $ — $ 26,412
Biggest changeRepurchases of Common Stock A summary of our repurchases of DXP Enterprises, Inc. common stock under our current share repurchase program and employee stock awards withheld for certain tax obligations during the quarter ended December 31, 2024 is as follows: Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ( in thousands ) (2) October 1 - October 31 — $ — — $ 85,000 November 1 – November 30 — — — 85,000 December 1 – December 31 79 74.24 — 85,000 Total 79 $ 74.24 — $ 85,000 (1) There were 79 shares transferred from employees in satisfaction of minimum statutory tax withholding obligations upon the vesting of restricted stock during the three months ended December 31, 2024.
Stock Performance The following performance graph compares the performance of the Company's common stock to the NASDAQ Industrial Index, S&P 400 Index and Dow Jones U.S. Industrial Suppliers Index. The graph assumes that the value of the investment in the Company's common stock and in each index was $100 at December 31, 2018.
Stock Performance The following performance graph compares the performance of the Company's common stock to the NASDAQ Industrial Index, S&P 400 Index and Dow Jones U.S. Industrial Suppliers Index. The graph assumes that the value of the investment in the Company's common stock and in each index was $100 at December 31, 2019.
The unregistered shares were issued to the sellers of Cisco. 27 Table of Contents The Company issued 18,263 unregistered shares of common stock as part of the consideration for the March 1, 2022 acquisition of Drydon. The unregistered shares were issued to the sellers of Drydon.
The unregistered shares were issued to the sellers of Cisco. 30 Table of Contents The Company issued 18,263 unregistered shares of common stock as part of the consideration for the March 1, 2022 acquisition of Drydon. The unregistered shares were issued to the sellers of Drydon.
Investors are cautioned against drawing conclusions from the data contained in the graph below as past results are not necessarily indicative of future performance. Recent Sales of Unregistered Securities The Company did not issue any unregistered shares of common stock during the year ended December 31, 2023.
Investors are cautioned against drawing conclusions from the data contained in the graph below as past results are not necessarily indicative of future performance. Recent Sales of Unregistered Securities The Company did not issue any unregistered shares of common stock during the years ended December 31, 2024 and 2023.
ITEM 5. Market for the Registrant's Common Equity, Related Shareholder Matters and I ssuer Purchases of Equity Securities Our common stock trades on The NASDAQ Global Select Market under the stock ticker symbol "DXPE". On March 4, 2024, we had approximately 358 holders of record for outstanding shares of our common stock.
ITEM 5. Market for the Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Our common stock trades on The NASDAQ Global Select Market under the stock ticker symbol “DXPE”. On February 28, 2025, we had approximately 293 holders of record for outstanding shares of our common stock.
Added
(2) On August 28, 2024, the Company announced a new Share Repurchase Program pursuant to which it may repurchase up to $85.0 million worth, or 2.5 million shares, of the Company's outstanding common stock over the next 24 months at the discretion of management.
Added
As of December 31, 2024, approximately $85.0 million worth of, or approximately 2.5 million, shares remained available under the $85.0 million Share Repurchase Program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

69 edited+28 added−38 removed131 unchanged
Biggest changeLegal and Regulatory • Risks associated with substantial or material claim or lawsuits that are not covered by insurance. • The nature of our manufactured products carries the possibility of significant product liability and warranty claims, which could harm our business and future results. • We are subject to potential shareholder litigation associated with potential volatile trading of our common stock. • We are subject to personal injury, product liability and environmental claims involving allegedly defective products. • We are subject to risks associated with conducting business in foreign countries. • We are subject to environmental, health and safety laws and regulations that may lead to liabilities and negatively impact our business. • We are subject to various government regulations, the cost of compliance of such regulations could increase our cost of conducting business and any violations of such regulations could materially adversely affect our financial condition or results of operations. 15 Table of Contents The following are more detailed discussions of our Risk Factors summarized above: Risk Related to the Company's Business and Operations Demand for our products could decrease if the manufacturers of those products sell them directly to end users.
Biggest changeCredit and Access to Debt Capital • We may not be able to refinance on favorable terms, extend, or repay our debt, which could adversely affect our results of operations or may result in default of our debt. • Our failure to comply with financial covenants of our credit facilities may adversely affect our results of operations and our financial conditions. • We may not be able to access acquisition financing, including debt capital. • A deterioration in the oil and gas sector or other circumstances may negatively impact our business and results of operations and thus hinder our ability to comply with financial covenants under our credit facilities, including the Secured Leverage Ratio and Fixed Charge Coverage Ratio financial covenants. • Changes in our credit profile may affect our relationship with our suppliers, which could have a material adverse effect on our liquidity. 17 Table of Contents Legal and Regulatory • Risks associated with substantial or material claim or lawsuits that are not covered by insurance. • The nature of our manufactured products carries the possibility of significant product liability and warranty claims, which could harm our business and future results. • We are subject to potential shareholder litigation associated with potential volatile trading of our common stock. • We are subject to personal injury, product liability and environmental claims involving allegedly defective products. • We are subject to risks associated with conducting business in foreign countries. • We are subject to environmental, health and safety laws and regulations that may lead to liabilities and negatively impact our business. • We are subject to various government regulations, the cost of compliance of such regulations could increase our cost of conducting business and any violations of such regulations could materially adversely affect our financial condition or results of operations.
All officers of DXP hold office until the regular meeting of the board of directors following the 2024 Annual Meeting of Shareholders or until their respective successors are duly elected and qualified or their earlier resignation or removal. Available Information Our internet address is www.dxpe.com and the investor relations section of our website is located at ir.dxpe.com.
All officers of DXP hold office until the regular meeting of the board of directors following the 2025 Annual Meeting of Shareholders or until their respective successors are duly elected and qualified or their earlier resignation or removal. Available Information Our internet address is www.dxpe.com and the investor relations section of our website is located at ir.dxpe.com.
We generally compete on expertise, responsiveness and price in all of our segments. 10 Table of Contents Insurance We maintain liability and other insurance that we believe to be customary and generally consistent with industry practice. We retain a portion of the risk for medical claims, general liability, worker’s compensation and property losses.
We generally compete on expertise, responsiveness, and price in all of our segments. 12 Table of Contents Insurance We maintain liability and other insurance that we believe to be customary and generally consistent with industry practice. We retain a portion of the risk for medical claims, general liability, worker’s compensation and property losses.
The Company believes its colleagues around the world thrive in this culture, as it allows them to experience significant autonomy, a sense of shared ownership with their colleagues, and a work atmosphere deeply rooted in the Company's core values. 11 Table of Contents Compensation and Benefits.
The Company believes its colleagues around the world thrive in this culture, as it allows them to experience significant autonomy, a sense of shared ownership with their colleagues, and a work atmosphere deeply rooted in the Company's core values. 13 Table of Contents Compensation and Benefits.
We conduct a meaningful amount of business outside of the U.S. We could be adversely affected by economic, legal, political and regulatory developments in countries that we conduct business in. We have meaningful operations in Canada in which the functional currency is denominated in Canadian dollars. We also have operations in Dubai, where the functional currency is dirham.
We conduct a meaningful amount of business outside of the U.S. We could be adversely affected by economic, legal, political and regulatory developments in countries that we conduct business in. We have meaningful operations in Canada in which the functional currency is denominated in Canadian dollars. We also have operations in the U.A.E., where the functional currency is dirham.
We distribute products from certain manufacturers and suppliers. Nevertheless, in the future we may have difficulty obtaining the products we need from suppliers and manufacturers as a result of unexpected demand, production difficulties that might extend lead times or a supplier’s decision to sell its products through other distributors.
Nevertheless, in the future we may have difficulty obtaining the products we need from suppliers and manufacturers as a result of unexpected demand, production difficulties that might extend lead times or a supplier’s decision to sell its products through other distributors.
Such a combination could materially increase the severity of the impact of these risks on our results of operations, liquidity and financial condition. 14 Table of Contents We face a variety of risks that are substantial and inherent in our businesses.
Such a combination could materially increase the severity of the impact of these risks on our results of operations, liquidity and financial condition. 16 Table of Contents We face a variety of risks that are substantial and inherent in our businesses.
Molero is a certified public accountant and has over 18 years of experience in accounting within a public company environment and most recently as a Chief Accounting Officer of another publicly traded company. Prior to DXP, Mr.
Molero is a certified public accountant and has over 20 years of experience in accounting within a public company environment and most recently as a Chief Accounting Officer of another publicly traded company. Prior to DXP, Mr.
Reductions in our margins and profitability on sales could have a material adverse effect on our business. We rely upon third-party transportation providers for our merchandise shipments and are subject to increased shipping costs as well as the potential inability of our third-party transportation providers to deliver products on a timely basis.
Reductions in our margins and profitability on sales could have a material adverse effect on our business. 19 Table of Contents We rely upon third-party transportation providers for our merchandise shipments and are subject to increased shipping costs as well as the potential inability of our third-party transportation providers to deliver products on a timely basis.
In cases where we maintain insurance coverage, our insurers may raise various objections and exceptions to coverage which could make uncertain the timing and amount of any possible insurance recovery. The nature of our manufactured products carries the possibility of significant product liability and warranty claims, which could harm our business and future results.
In cases where we maintain insurance coverage, our insurers may raise various objections and exceptions to coverage which could make uncertain the timing and amount of any possible insurance recovery. 24 Table of Contents The nature of our manufactured products carries the possibility of significant product liability and warranty claims, which could harm our business and future results.
Our ability to implement this strategy will depend on our success in selling more products and services to existing customers, acquiring new customers, hiring qualified sales persons, and marketing integrated forms of supply management such as those being pursued by us through our SmartSource SM program.
Our ability to implement this strategy will depend on our success in selling more products and services to existing customers, acquiring new customers, hiring qualified salespersons, and marketing integrated forms of supply management such as those being pursued by us through our SmartSource SM program.
Our ability to grow at or above our historic rates depends in part upon our ability to identify and successfully acquire and integrate companies and businesses at appropriate prices and realize anticipated cost savings. 17 Table of Contents Goodwill and intangible assets recorded as a result of our acquisitions could become impaired.
Our ability to grow at or above our historic rates depends in part upon our ability to identify and successfully acquire and integrate companies and businesses at appropriate prices and realize anticipated cost savings. Goodwill and intangible assets recorded as a result of our acquisitions could become impaired.
Unlike many other distributors who buy products from second-tier sources, the Company takes customers to the source of the products they need. At December 31, 2023, the SCS segment operated supply chain installations in 81 of our customers’ sites. All of the SCS segment’s long-lived assets are in the U.S. and Mexico.
Unlike many other distributors who buy products from second-tier sources, the Company takes customers to the source of the products they need. At December 31, 2024, the SCS segment operated supply chain installations in 86 of our customers’ sites. All of the SCS segment’s long-lived assets are in the U.S. and Mexico.
The majority of the SCS segment’s 2023 revenues were recognized in the U.S. At December 31, 2023, the SCS segment had 419 employees, all of whom were full-time. Products Most industrial customers currently purchase their MRO products through local or national distribution companies that are focused on single or unique product categories.
The majority of the SCS segment’s 2024 revenues were recognized in the U.S. At December 31, 2024, the SCS segment had 397 employees, all of whom were full-time. Products Most industrial customers currently purchase their MRO products through local or national distribution companies that are focused on single or unique product categories.
If such circumstance happens, our business, reputation, results of operations or financial condition could be adversely affected and our existing debt could be in default. 20 Table of Contents Our failure to comply with financial covenants of our credit facilities may adversely affect our results of operations and our financial conditions.
If such circumstance happens, our business, reputation, results of operations or financial condition could be adversely affected and our existing debt could be in default. Our failure to comply with financial covenants of our credit facilities may adversely affect our results of operations and our financial conditions.
In the future the Company may not be able to comply with the covenants or, if is not able to do so, that its lenders will be willing to waive such non-compliance or amend such covenants. We may not be able to access acquisition financing, including debt capital.
In the future the Company may not be able to comply with the covenants or, if is not able to do so, that its lenders will be willing to waive such non-compliance or amend such covenants. 23 Table of Contents We may not be able to access acquisition financing, including debt capital.
Executive Officers The following is a list of the Company's executive officers, their age, positions, and a description of each officer’s business experience as of March 11, 2024. All of our executive officers hold office at the pleasure of the Company's Board of Directors. NAME AGE TITLE David R.
Executive Officers The following is a list of the Company's executive officers, their age, positions, and a description of each officer’s business experience as of March 10, 2025. All of our executive officers hold office at the pleasure of the Company's Board of Directors. NAME AGE TITLE David R.
At December 31, 2023, our combined goodwill and intangible assets amounted to $407.9 million, net of accumulated amortization. To the extent we do not generate sufficient cash flows to recover the net amount of any investments in goodwill and other intangible assets recorded, the investment could be considered impaired and subject to write-off which would directly impact earnings.
At December 31, 2024, our combined goodwill and intangible assets amounted to $538.0 million, net of accumulated amortization. To the extent we do not generate sufficient cash flows to recover the net amount of any investments in goodwill and other intangible assets recorded, the investment could be considered impaired and subject to write-off which would directly impact earnings.
For the last three fiscal years, no manufacturer accounted for 10% or more of our revenues. Over 90% of our business relates to sales of products. Service revenues are less than 10% of sales. The Company has operations in the U.S., Canada, Mexico, and Dubai.
For the last three fiscal years, no customer accounted for 10% or more of our revenues. Over 90% of our business relates to sales of products. Service revenues are less than 10% of sales. The Company has operations in the U.S., Canada, Mexico, and the U.A.E.
We are not currently aware of any environmental situation or violations of government regulations that we believe are likely to have a material adverse effect on our results of operations or financial condition. Human Capital The Company employed 2,837 people as of December 31, 2023.
We are not currently aware of any environmental situation or violations of government regulations that we believe are likely to have a material adverse effect on our results of operations or financial condition. Human Capital The Company employed 3,028 people as of December 31, 2024.
Compliance with laws and regulations increases our cost of doing business. We are subject to a variety of U.S. and foreign laws and regulations, including without limitation import and export requirements, the Foreign Corrupt Practices Act (the “FCPA”), U.S. and foreign tax laws (including U.S. taxes on our foreign subsidiaries), data privacy requirements, labor laws and anti-competition regulations.
We are subject to a variety of U.S. and foreign laws and regulations, including without limitation import and export requirements, the Foreign Corrupt Practices Act (the “FCPA”), U.S. and foreign tax laws (including U.S. taxes on our foreign subsidiaries), data privacy requirements, labor laws and anti-competition regulations.
He has executed over 52 transactions including more than $1.6 billion in M&A and $3.9 billion in financing transactions primarily for change of control deals and numerous industrial and distribution acquisition and sale assignments. He holds a Bachelors of Arts in Urban Planning from Morehouse College and an MBA from Harvard University Graduate School of Business. Nick Little . Mr.
He has executed over 60 transactions including more than $1.8 billion in M&A and $4.5 billion in financing transactions primarily for change of control deals and numerous industrial and distribution acquisition and sale assignments. He holds a Bachelors of Arts in Urban Planning from Morehouse College and an MBA from Harvard University Graduate School of Business. Nick Little . Mr.
The following is a summary of some of the more important factors that could affect our businesses: Business and Operations • Demand for our products could decrease if manufacturers decide to sell them direct. • Changes in our customer or product mix, could cause our gross margins to fluctuate. • Material changes in the costs of our products from manufacturers without the ability to pass price increases onto our customers could cause our gross margins to decline. • Our manufacturers may cancel our oral or written distribution authorizations upon little or no notice, which could adversely impact our revenues and profits from distributing certain manufacturer’s products. • We may experience unexpected supply shortages, which could adversely affect our product and service offerings and our business. • Price reductions by our manufacturers of products that we sell could cause the value of our inventory to decline. • We are subject to increased shipping costs as well as the potential inability of our third-party transportation providers to deliver products on a timely basis. • Our business has substantial competition that could adversely affect our results. • The loss of or the failure to attract and retain key personnel could adversely impact our results of operations. • The loss of any key supplier could adversely affect the Company’s sales and profitability. • Our future results will be impacted by our ability to implement our internal growth strategy. • Our future results will be impacted by the effective execution of our acquisition strategy. • Goodwill and intangible assets recorded as a result of our acquisitions could become impaired. • Interruptions in the proper functioning of our information systems could disrupt operations and cause increases in costs and/or decreases in revenues. • Cybersecurity breaches and other disruptions or misuse of our network and information systems could affect our ability to conduct our business effectively. • Our backlog is subject to unexpected adjustments and potential cancellations. • Our actual results could differ from the assumptions and estimates used to prepare our financial statements. • If we do not successfully remediate our internal controls weaknesses, our financial statements may not be accurate and the trading price of our stock could be negatively impacted.
The following is a summary of some of the more important factors that could affect our businesses: Business and Operations • Demand for our products could decrease if manufacturers decide to sell them direct. • Changes in our customer or product mix, could cause our gross margins to fluctuate. • Material changes in the costs of our products from manufacturers without the ability to pass price increases onto our customers could cause our gross margins to decline. • A variety of issues could affect the timing or profitability of our projects, and could result in, among other things, project termination or payment of liquidated damages. • Changes in estimates related to revenues and costs under customer contracts could result in a reduction or elimination of revenues or profits and the recognition of losses. • Our manufacturers may cancel our oral or written distribution authorizations upon little or no notice, which could adversely impact our revenues and profits from distributing certain manufacturer’s products. • We may experience unexpected supply shortages, which could adversely affect our product and service offerings and our business. • Price reductions by our manufacturers of products that we sell could cause the value of our inventory to decline. • We are subject to increased shipping costs as well as the potential inability of our third-party transportation providers to deliver products on a timely basis. • Our business has substantial competition that could adversely affect our results. • The loss of or the failure to attract and retain key personnel could adversely impact our results of operations. • The loss of any key supplier could adversely affect the Company’s sales and profitability. • Our future results will be impacted by our ability to implement our internal growth strategy. • Our future results will be impacted by the effective execution of our acquisition strategy. • Goodwill and intangible assets recorded as a result of our acquisitions could become impaired. • Interruptions in the proper functioning of our information systems could disrupt operations and cause increases in costs and/or decreases in revenues. • Cybersecurity breaches and other disruptions or misuse of our network and information systems could affect our ability to conduct our business effectively. • Our backlog is subject to unexpected adjustments and potential cancellations. • Our actual results could differ from the assumptions and estimates used to prepare our financial statements.
We currently serve as a first-tier distributor of more than 1,000,000 items of which more than 60,000 are stock keeping units (SKUs) for use primarily by customers engaged in the oil and gas, food and beverage, chemical and petrochemical, transportation and other general industrial industries.
We currently serve as a first-tier distributor of more than 1,000,000 items of which more than 60,000 are stock keeping units (SKUs) for use primarily by customers engaged in the oil and gas, general industrial, manufacturing, chemical, food and beverage, refining, water & wastewater, fabrication & construction and other industries.
At December 31, 2023, the Innovative Pumping Solutions segment operated out of 22 facilities, 20 of which are located in the U.S. and two in Canada. All of the IPS segment’s long-lived assets are located in the U.S.
At December 31, 2024, the Innovative Pumping Solutions segment operated out of 32 facilities, 28 of which are located in the U.S. and two in Canada. All of the IPS segment’s long-lived assets are located in the U.S.
Little 72 Chairman of the Board, President and Chief Executive Officer Kent Yee 48 Senior Vice President/Chief Financial Officer/Secretary Nick Little 42 Senior Vice President/Chief Operating Officer Chris Gregory 49 Senior Vice President/Chief Information Technology Officer Paz Maestas 44 Senior Vice President/Chief Marketing & Technology Officer David C. Vinson 73 Senior Vice President/Innovative Pumping Solutions John J.
Little 73 Chairman of the Board, President and Chief Executive Officer Kent Yee 49 Senior Vice President/Chief Financial Officer/Secretary Nick Little 43 Senior Vice President/Chief Operating Officer Chris Gregory 50 Senior Vice President/Chief Information Technology Officer Paz Maestas 45 Senior Vice President/Chief Marketing & Technology Officer David C. Vinson 74 Senior Vice President/Innovative Pumping Solutions John J.
This process helps maximize the pump packages’ life and minimizes any impact to the environment. With over 100 years of fabrication experience, the Company has acquired the technical expertise to ensure that our pumps and pump packages are built to meet the highest standards. The Company utilizes manufacturer authorized equipment and manufacturer certified personnel.
With over 100 years of fabrication experience, the Company has acquired the technical expertise to ensure that our pumps and pump packages are built to meet the highest standards. The Company utilizes manufacturer authorized equipment and manufacturer certified personnel.
We are subject to federal, state, local, foreign and provincial environmental, health and safety laws and regulations. Fines and penalties may be imposed for non-compliance with applicable environmental, health and safety requirements and the failure to have or to comply with the terms and conditions of required permits.
Fines and penalties may be imposed for non-compliance with applicable environmental, health and safety requirements and the failure to have or to comply with the terms and conditions of required permits.
Typically, MRO products have been purchased through distributors and not directly from the manufacturers of those products. If customers were to purchase our products directly from manufacturers, or if manufacturers sought to increase their efforts to sell directly to end users, we could experience a significant decrease in sales and earnings.
If customers were to purchase our products directly from manufacturers, or if manufacturers sought to increase their efforts to sell directly to end users, we could experience a significant decrease in sales and earnings.
If certain manufacturers cancel the distribution authorizations they granted to us, our distribution of their products could be disrupted and such occurrence could have a material adverse effect on our results of operations and financial conditions. We may experience unexpected supply shortages, which could adversely affect our product and service offerings and our business.
If certain manufacturers cancel the distribution authorizations they granted to us, our distribution of their products could be disrupted and such occurrence could have a material adverse effect on our results of operations and financial conditions.
The failure by us to comply with applicable environmental, health and safety requirements could result in significant liabilities including fines, penalties, enforcement actions, third party claims for property damage and personal injury, requirements to clean up property or to pay for the costs of cleanup, or regulatory or judicial orders requiring corrective measures, which could negatively impact our business.
The failure by us to comply with applicable environmental, health and safety requirements could result in significant liabilities including fines, penalties, enforcement actions, third party claims for property damage and personal injury, requirements to clean up property or to pay for the costs of cleanup, or regulatory or judicial orders requiring corrective measures, which could negatively impact our business. 25 Table of Contents We are subject to various government regulations, the cost of compliance of such regulations could increase our cost of conducting business and any violations of such regulations could materially adversely affect our financial condition or results of operations.
As the value of currencies in foreign countries in which we have operations increases or decreases related to the U.S. dollar, the sales, expenses, profits, losses assets and liabilities of our foreign operations, as reported in our consolidated financial statements, increase or decrease, accordingly. 22 Table of Contents We are subject to environmental, health and safety laws and regulations that may lead to significant liabilities and negatively impact our business.
As the value of currencies in foreign countries in which we have operations increases or decreases related to the U.S. dollar, the sales, expenses, profits, losses assets and liabilities of our foreign operations, as reported in our consolidated financial statements, increase or decrease, accordingly.
Information regarding financial data by geographic areas is set forth in Note 19 - Revenue of the Notes to Consolidated Financial Statements. Recent Acquisitions A key component of our growth strategy includes acquiring businesses with complementary or desirable product lines, locations or customers. Since 2004, we have completed 51 acquisitions.
Information regarding financial data by geographic areas is set forth in Note 19 - Revenue of the Notes to Consolidated Financial Statements. Acquisitions A key component of our growth strategy includes acquiring businesses with complementary and desirable product lines, locations, or customers in order to maintain our leading position as the largest distributor of rotating equipment in North America.
Our sales of integrated pump packages, remanufactured pumps or branded private label pumps are generally derived from customer purchase orders containing the customers’ unique specifications. Sales are directly solicited from customers by our dedicated sales force. The Company's engineering staff can design a complete custom pump package to meet our customers’ project specifications.
Our IPS segment provides a single source for design, engineering, project management and systems design and fabrication for unique customer specifications. Our sales of integrated pump packages, remanufactured pumps or branded private label pumps are generally derived from customer purchase orders containing the customers’ unique specifications. Sales are directly solicited from customers by our dedicated sales force.
We may not be successful in efforts to increase sales and product offerings to existing customers. Consolidation in our industry could heighten the impacts of competition on our business and results of operations discussed above. The fact that we do not traditionally enter into long-term contracts with our suppliers or customers may provide opportunities for our competitors.
We may not be successful in efforts to increase sales and product offerings to existing customers. Consolidation in our industry could heighten the impacts of competition on our business and results of operations discussed above.
In addition, one of our employees, contractors or other third party may attempt to circumvent security measures in order to obtain such information or inadvertently cause a breach involving such information.
Computer hackers may attempt to penetrate our information systems or our vendors' information systems and, if successful, misappropriate confidential customer, supplier, employee or other business information. In addition, one of our employees, contractors or other third party may attempt to circumvent security measures in order to obtain such information or inadvertently cause a breach involving such information.
The Company's Service Centers provide a wide range of MRO products in the rotating equipment, bearing, power transmission, hose, fluid power, metal working, industrial supply and safety product and service categories.
At December 31, 2024, our Service Centers’ products and services were distributed from 157 service center facilities and 4 distribution centers. The Company's Service Centers provide a wide range of MRO products in the rotating equipment, bearing, power transmission, hose, fluid power, metal working, industrial supply and safety product and service categories.
Decades of supply chain inventory management experience and comprehensive research, as well as a thorough understanding of our customers’ businesses and industries have allowed us to design standardized programs that are flexible enough to be fully adaptable to address our customers’ unique MRO products supply chain challenges.
This assessment determines if and how we can best streamline operations, drive value within the procurement process, and increase control in storeroom management. 10 Table of Contents Decades of supply chain inventory management experience and comprehensive research, as well as a thorough understanding of our customers’ businesses and industries have allowed us to design standardized programs that are flexible enough to be fully adaptable to address our customers’ unique MRO products supply chain challenges.
Furthermore, we may not be able to continue to obtain insurance on commercially reasonable terms in the future, and we may incur losses from interruption of our business that exceed our insurance coverage.
Even a partially uninsured claim, if successful and of significant size, could have a material adverse effect on our business, results of operations and financial condition. Furthermore, we may not be able to continue to obtain insurance on commercially reasonable terms in the future, and we may incur losses from interruption of our business that exceed our insurance coverage.
Headcount by segment and country are as follows: Business Segment Employees Country Employees Service Centers 1,723 United States 2,613 Innovative Pumping Solutions 383 Canada 213 Supply Chain Services 419 Other (1) 11 Corporate 312 Total Employees 2,837 Total Employees 2,837 (1) Includes employees located in Mexico and Dubai.
Headcount by segment and country are as follows: Business Segment Employees Country Employees Service Centers 1,843 United States 2,796 Innovative Pumping Solutions 462 Canada 221 Supply Chain Services 397 Other (1) 11 Corporate 326 Total Employees 3,028 Total Employees 3,028 (1) Includes employees located in Mexico and the U.A.E.
We compete with a variety of industrial supply distributors, some of which may have greater financial and other resources than us.
Our business has substantial competition that could adversely affect our results. Our business is highly competitive. We compete with a variety of industrial supply distributors, some of which may have greater financial and other resources than us.
Any breach of network, information systems, or our data security could result in a disruption of our services or improper disclosure of personal data or confidential information, which could harm our reputation, require us to expend resources to remedy such a security breach or defend against further attacks or subject us to liability under laws that protect personal data, resulting in increased operating costs or loss of revenue. 18 Table of Contents Our backlog is subject to unexpected adjustments and potential cancellations Our backlog generally consists of projects for which we have an executed contract or commitment with a client and reflects our expected revenue from the contract or commitment, which is often subject to revision over time.
Any breach of network, information systems, or our data security could result in a disruption of our services or improper disclosure of personal data or confidential information, which could harm our reputation, require us to expend resources to remedy such a security breach or defend against further attacks or subject us to liability under laws that protect personal data, resulting in increased operating costs or loss of revenue.
Sales are directly solicited from customers by our sales force. The Company's Service Centers are stocked and staffed with knowledgeable sales associates and backed by a centralized customer service team of experienced industry professionals. At December 31, 2023, our Service Centers’ products and services were distributed from 157 service centers and 4 distribution centers.
A majority of our Service Center segment sales are derived from customer purchase orders for products. Sales are directly solicited from customers by our sales force. The Company's Service Centers facilities are stocked and staffed with knowledgeable sales associates and backed by a centralized customer service team of experienced industry professionals.
This strategy includes taking advantage of a consolidation trend in the industry and effecting acquisitions of businesses with complementary or desirable product lines, strategic distribution locations, attractive customer bases or manufacturer relationships.
We may not be able to consummate acquisitions at rates similar to the past, which could adversely impact our growth rate and stock price. This strategy includes taking advantage of a consolidation trend in the industry and effecting acquisitions of businesses with complementary or desirable product lines, strategic distribution locations, attractive customer bases or manufacturer relationships.
If we change the shipping companies we use, we could face logistical difficulties that could adversely affect deliveries and we would incur costs and expend resources in connection with such change.
If we change the shipping companies we use, we could face logistical difficulties that could adversely affect deliveries and we would incur costs and expend resources in connection with such change. In addition, we may not be able to obtain favorable terms as we have with our current third-party transportation providers.
Innovative Pumping Solutions The Company's Innovative Pumping Solutions (IPS) segment provides integrated, custom pump skid packages, pump remanufacturing and manufactures branded private label pumps to meet the capital equipment needs of our global customer base.
At December 31, 2024, the Service Centers segment had 1,843 employees, all of whom were full-time. 8 Table of Contents Innovative Pumping Solutions The Company's Innovative Pumping Solutions (“IPS”) segment provides integrated, custom pump skid packages, pump remanufacturing and manufactures branded private label pumps to meet the capital equipment needs of our global customer base.
Interruptions in the proper functioning of our information systems could disrupt operations and cause increases in costs and/or decreases in revenues. The proper functioning of the Company's information systems is critical to the successful operation of our business.
Interruptions in the proper functioning of our information systems could disrupt operations and cause increases in costs and/or decreases in revenues. The operation of our business depends critically on the functioning of our information systems. We continue to invest in software, hardware and network infrastructures to effectively manage our information systems.
While certain catalog distributors provide product offerings as broad as ours, these competitors do not offer the product application, technical expertise and after-the-sale services that we provide. In the Innovative Pumping Solutions segment we compete against a variety of manufacturers, distributors and fabricators, many of which may have greater financial and other resources than we do.
In the Innovative Pumping Solutions segment we compete against a variety of manufacturers, distributors and fabricators, many of which may have greater financial and other resources than we do.
We offer a wide range of industrial MRO products, equipment and services through a continuum of customized and efficient MRO solutions. We also provide services such as field safety supervision, in-house and field repair and predictive maintenance. A majority of our Service Center segment sales are derived from customer purchase orders for products.
As a first-tier distributor, we are able to reduce our customers' costs and improve efficiencies in the supply chain. We offer a wide range of industrial MRO products, equipment and services through a continuum of customized and efficient MRO solutions. We also provide services such as field safety supervision, in-house and field repair and predictive maintenance.
Cybersecurity breaches and other disruptions or misuse of our network and information systems could affect our ability to conduct our business effectively. Through our sales channels and electronic communications with customers generally, we collect and maintain confidential information that customers provide to us in order to purchase products or services.
Through our sales channels and electronic communications with customers generally, we collect and maintain confidential information that customers provide to us in order to purchase products or services. We also acquire and retain information about suppliers and employees in the normal course of business.
We are subject to various government regulations, the cost of compliance of such regulations could increase our cost of conducting business and any violations of such regulations could materially adversely affect our financial condition or results of operations. We are subject to laws and regulations in every jurisdiction where we operate including the U.S. and certain foreign countries.
We are subject to laws and regulations in every jurisdiction where we operate including the U.S. and certain foreign countries. Compliance with laws and regulations increases our cost of doing business.
Our foreign operations are subject to certain unique risks, which are more fully disclosed in Item 1A " Risk Factors, " " Ris ks Associated with Legal and Regulatory Matters " . At December 31, 2023, the Service Centers segment had 1,723 employees, all of whom were full-time.
Our foreign operations are subject to certain unique risks, which are more fully disclosed in Item 1A “ Risk Factors, ” “ Risks Associated with Legal and Regulatory Matters ”.
Drafting programs such as Solidworks and AutoCAD® allow our engineering team to verify the design and layout of packages with our customers prior to the start of fabrication. Finite Elemental Analysis programs such as Cosmos Professional are used to design the package to meet all normal and future loads and forces.
The Company's engineering staff can design a complete custom pump package to meet our customers’ project specifications. Drafting programs such as SolidWorks and AutoCAD® allow our engineering team to verify the design and layout of packages with our customers prior to the start of fabrication.
Risks Related to the Market and Economy A general slowdown in the economy could negatively impact the Company's sales growth and profitability. Economic and industry trends affect the Company's business. Demand for our products is subject to economic trends affecting our customers and the industries in which they compete in particular.
Demand for our products is subject to economic trends affecting our customers and the industries in which they compete in particular.
As a first-tier distributor, our network of service and distribution centers stock more than 60,000 SKUs and provide customers with access to more than 1,000,000 items. Given our breadth of product and our industrial distribution customers’ focus around specific product categories, we have become customer driven experts in five key product categories.
As a first-tier distributor, our network of service and distribution centers stock more than 60,000 SKUs and provide customers with access to more than 1,000,000 items. The Company tailors its inventory and leverages product experts to meet the needs of its local customers.
It is possible, however, that judgments could be rendered against us in cases in which we would be uninsured and beyond the amounts that we currently have reserved or anticipate incurring for such matters. Even a partially uninsured claim, if successful and of significant size, could have a material adverse effect on our business, results of operations and financial condition.
We maintain insurance to cover potential losses, and we are subject to various deductibles and caps under our insurance. It is possible, however, that judgments could be rendered against us in cases in which we would be uninsured and beyond the amounts that we currently have reserved or anticipate incurring for such matters.
Other industries served by our Service Centers include mining, construction, chemical, municipal water and wastewater, agriculture and pulp and paper. The Service Centers segment’s long-lived assets are located in the U.S., Canada and Dubai. Approximately 5.0% of the Service Centers segment’s revenues were in Canada and the remainder was virtually all in the U.S.
The Service Centers segment’s long-lived assets are located in the U.S., Canada and the U.A.E. Approximately 6.1% of the Service Centers segment’s revenues were in Canada and the remainder was virtually all in the U.S.
Total backlog, representing firm orders for the IPS segment products that have been received and entered into our production systems, was $138.4 million and $108.5 million at December 31, 2023 and 2022, respectively. Supply Chain Services The Company's Supply Chain Services (SCS) segment manages all or part of its customers’ supply chains, including procurement and inventory management.
At December 31, 2024, the IPS segment had 462 employees, all of whom were full-time. 9 Table of Contents Total backlog, representing firm orders for the IPS segment products that have been received and entered into our production systems, was $292.2 million and $138.4 million at December 31, 2024 and 2023, respectively.
Jeffery 56 Senior Vice President/Supply Chain Services Todd Hamlin (1) 52 Senior Vice President/Service Centers David Molero Santos 42 Vice President/Chief Accounting Officer (1) On January 26, 2024 Mr. Hamlin departed the Company. 12 Table of Contents David R. Little . Mr.
Jeffery 57 Senior Vice President/Supply Chain Services David Molero Santos 43 Vice President/Chief Accounting Officer 14 Table of Contents David R. Little . Mr.
Jeffery has served in various significant capacities including branch, area, regional and national sales management as well as sales, marketing, information technology and Service Center vice president roles. He holds a Bachelor of Science in Industrial Distribution from Texas A&M University and is also a graduate of the Executive Business Program at Rice University. 13 Table of Contents Todd Hamlin.
Jeffery has served in various significant capacities including branch, area, regional and national sales management as well as sales, marketing, information technology and Service Center vice president roles.
Some of these claims may relate to the activities of businesses that we have acquired, even though these activities may have occurred prior to acquisition.
Some of these claims may relate to the activities of businesses that we have acquired, even though these activities may have occurred prior to acquisition. The products we distribute, and/or manufacture, are subject to inherent risks that could result in personal injury, property damage, pollution, death or loss of production.
In the Service Centers segment we compete with a variety of industrial supply distributors, some of which may have greater financial and other resources than we do. Some of our competitors are small enterprises selling to customers in a limited geographic area. We also compete with catalog distributors, large warehouse stores and, to a lesser extent, manufacturers.
Some of our competitors are small enterprises selling to customers in a limited geographic area. We also compete with catalog distributors, large warehouse stores and, to a lesser extent, manufacturers. While certain catalog distributors provide product offerings as broad as ours, these competitors do not offer the product application, technical expertise and after-the-sale services that we provide.
If critical information systems fail or are otherwise unavailable, The Company's ability to procure products to sell, process and ship customer orders, identify business opportunities, maintain proper levels of inventories, collect accounts receivable and pay accounts payable and expenses could be adversely affected.
If critical information systems fail or otherwise become unavailable, our ability to operate our digital platforms, process orders, maintain proper levels of inventories, collect accounts receivable, disburse funds, manage our supply chain, monitor results of operations, and process and store team member or customer data, among other functions, could be adversely affected.
He holds a Bachelor’s of Science in Industrial Distribution from Texas A&M University and a Master in Distribution from Texas A&M University. Mr. Hamlin serves on the Advisory Board for Texas A&M’s Master in Distribution degree program. In 2014, Mr. Hamlin was elected to the Bearing Specialists Association’s Board of Directors. David Molero Santos. Mr.
He holds a Bachelor of Science in Industrial Distribution from Texas A&M University and is also a graduate of the Executive Business Program at Rice University. 15 Table of Contents David Molero Santos. Mr.
Our information systems are vulnerable to natural disasters, power losses, telecommunication failures and other problems despite the protection of our information systems through physical and software safeguards and remote processing capabilities.
Furthermore, although backup and security systems, including physical and software safeguards and remote processing capabilities, protect our information systems, information systems are still vulnerable to damage or interruption from natural or human induced disasters, extreme weather, power losses, telecommunication failures, user error, third-party actions such as malicious computer programs, denial-of-service attacks and cybersecurity breaches, and other problems.
Segment 2023 Sales (in millions) % of Sales End Markets Locations Employees SC $1,145 68% General Industrial, Oil & Gas, Food & Beverage, Water & Wastewater, Chemical, Transportation, Aerospace & Other 157 service centers, 4 distribution centers 1,723 IPS $273 16% Oil & Gas, Mining, Chemical, Water & Wastewater and Utilities 16 fabrication facilities, 6 wastewater locations 383 SCS $260 16% Food & Beverage, Transportation, Oil & Gas, General Industrial & Chemical 81 customer sites 419 6 Table of Contents Service Centers The Service Centers (SC) are engaged in providing MRO products, equipment and services, including technical expertise and logistics capabilities, to a variety of customers serving varied end markets with the ability to provide same day delivery.
Consolidated Financial Summary and End Markets ______________________________________________________________________________________________________ ($ in millions) 2024 2023 2022 Sales $ 1,802 $ 1,679 $ 1,481 Operating Income $ 145 $ 139 $ 98 % Margin 8.1 % 8.3 % 6.6 % EBITDA $ 182 $ 170 $ 124 % Margin 10.1 % 10.1 % 8.3 % DXPeople 3,028 2,837 2,675 ______________________________________________________________________________________________________ 7 Table of Contents Service Centers The Service Centers (“SC”) are engaged in providing MRO products, equipment and services, including technical expertise and logistics capabilities, to a variety of customers serving varied end markets with the ability to provide same day delivery.
Our business is supported by the following five key product categories: rotating equipment; bearings & power transmission; industrial supplies; metal working; and safety products & services. The Company tailors its inventory and leverages product experts to meet the needs of its local customers. 8 Table of Contents Our key product categories include: • Rotating Equipment .
Given our breadth of product and our industrial distribution customers’ focus around specific product categories, we have become customer driven experts in the following five key product categories: 1.) rotating equipment; 2.) bearings & power transmission; 3.) industrial supplies; 4.) metal working; and 5.) safety products & services.
Risks associated with executing our acquisition strategy. Our future results will depend in part on our ability to successfully implement our acquisition strategy. We may not be able to consummate acquisitions at rates similar to the past, which could adversely impact our growth rate and stock price.
The fact that we do not traditionally enter into long-term contracts with our suppliers or customers may provide opportunities for our competitors. 20 Table of Contents Risks associated with executing our acquisition strategy. Our future results will depend in part on our ability to successfully implement our acquisition strategy.
Adjustments are reflected in contract revenue in the period when such estimates are revised. Such adjustments could be material and could result in reduced profitability. If we do not successfully remediate our internal controls weaknesses, our financial statements may not be accurate and the trading price of our stock could be negatively impacted.
Adjustments are reflected in contract revenue in the period when such estimates are revised. Such adjustments could be material and could result in reduced profitability. 22 Table of Contents Risks Related to the Market and Economy A general slowdown in the economy could negatively impact the Company's sales growth and profitability. Economic and industry trends affect the Company's business.
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We offer our customers a single source of supply on an efficient and competitive basis by being a first-tier distributor that can purchase products directly from manufacturers. As a first-tier distributor, we are able to reduce our customers' costs and improve efficiencies in the supply chain.
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The following chart represents financial information for the last three years and the key end markets our SC segment currently serves: Service Centers’ Financial Summary and End Markets ______________________________________________________________________________________________________ ($ in millions) 2024 2023 2022 Sales $ 1,223 $ 1,200 $ 1,041 Operating Income $ 175 $ 172 $ 132 % Margin 14.3 % 14.3 % 12.7 % EBITDA $ 182 $ 178 $ 135 % Margin 14.9 % 14.8 % 13.0 % SC Employees 1,843 1,723 1,651 ______________________________________________________________________________________________________ We offer our customers a single source of supply on an efficient and competitive basis by being a first-tier distributor that can purchase products directly from manufacturers.
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Additionally, our IPS segment provides project solutions and capital equipment to the water and wastewater treatment markets including potable water, bio-solid and residual management and wastewater treatment. Our IPS segment provides a single source for design, engineering, project management and systems design and fabrication for unique customer specifications.
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The following chart represents financial information for the last three years and the key end markets our IPS segment currently serves: Innovative Pumping Solutions’ Financial Summary and End Markets ______________________________________________________________________________________________________ ($ in millions) 2024 2023 2022 Sales $ 323 $ 219 $ 199 Operating Income $ 54 $ 35 $ 25 % Margin 16.6 % 16.1 % 12.5 % EBITDA $ 58 $ 39 $ 36 % Margin 18.0 % 17.8 % 18.1 % IPS Employees 462 383 337 ______________________________________________________________________________________________________ Additionally, our IPS segment provides project solutions and capital equipment to the water and wastewater treatment markets including potable water, bio-solid and residual management and wastewater treatment.
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Approximately 4.8% of the IPS segment’s 2023 revenues were recognized in Canada and 95.2% were in the U.S. 7 Table of Contents At December 31, 2023, the IPS segment had 383 employees, all of whom were full-time.
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Finite Elemental Analysis programs such as Cosmos Professional are used to design the package to meet all normal and future loads and forces. This process helps maximize the pump packages’ life and minimizes any impact to the environment.
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The SCS segment enters into long-term contracts with its customers that can be canceled on little or no notice under certain circumstances.
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Supply Chain Services The Company's Supply Chain Services (“SCS”) segment manages all or part of its customers’ supply chains, including procurement and inventory management.
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This assessment determines if and how we can best streamline operations, drive value within the procurement process, and increase control in storeroom management.
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The following chart represents financial information for the last three years and the key end markets our SCS segment currently serves: Supply Chain Services’ Financial Summary and End Markets ______________________________________________________________________________________________________ ($ in millions) 2024 2023 2022 Sales $ 256 $ 260 $ 240 Operating Income $ 22 $ 22 $ 20 % Margin 8.5 % 8.3 % 8.1 % EBITDA $ 22 $ 22 $ 20 % Margin 8.6 % 8.5 % 8.3 % SCS Employees 397 419 409 ______________________________________________________________________________________________________ The SCS segment enters into long-term contracts with its customers that can be canceled on little or no notice under certain circumstances.
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The following briefly describes the Company’s acquisition activity for the years ended December 31, 2023 and December 31, 2022. 9 Table of Contents On November 1, 2023, the Company completed the acquisition of Alliance Pump & Mechanical Service, Inc. (“Alliance”). Alliance is a leading municipal and industrial pump sales, service, and repair business.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeComparatively, based on a sensitivity analysis as of December 31, 2022, had short-term interest rates averaged 100 basis points higher (lower) in 2022 than in 2021, it was estimated that interest expense would have fluctuated by approximately $4.3 million.
Biggest changeComparatively, based on a sensitivity analysis as of December 31, 2023, had short-term interest rates averaged 100 basis points higher (lower) in 2023 than in 2022, it was estimated that interest expense would have fluctuated by approximately $5.5 million. These amounts were estimated by considering the effect of the hypothetical interest rates on variable-rate debt outstanding each year.
To monitor our currency exchange rate risks, we use sensitivity analysis, which measures the effect of devaluation of the Canadian dollar. Also see “Risk Factors,” included in Item 1A of this Report for additional risk factors associated with our business. 40 Table of Contents
To monitor our currency exchange rate risks, we use sensitivity analysis, which measures the effect of devaluation of the Canadian dollar. Also see “Risk Factors,” included in Item 1A of this Report for additional risk factors associated with our business. 44 Table of Contents
To reduce our interest rate risk we may enter into financial derivative instruments, including, but not limited to, interest rate swaps and rate lock agreements to manage and mitigate our exposure. As of December 31, 2023, we had no interest rate hedges in place.
To reduce our interest rate risk we may enter into financial derivative instruments, including, but not limited to, interest rate swaps and rate lock agreements to manage and mitigate our exposure. As of December 31, 2024, we had no interest rate hedges in place.
Based on a sensitivity analysis as of December 31, 2023, it was estimated that if short-term interest rates average 100 basis points higher (lower) in 2023 than in 2022, interest expense, would fluctuate by $5.5 million before tax.
Based on a sensitivity analysis as of December 31, 2024, it was estimated that if short-term interest rates average 100 basis points higher (lower) in 2024 than in 2023, interest expense, would fluctuate by $6.5 million before tax.
To mitigate risks associated with foreign currency fluctuations, contracts may be denominated in or indexed to the U.S. dollar and/or local inflation rates, or investments may be naturally hedged through debt and other liabilities denominated or issued in the foreign currency.
Foreign Currency Risk We are exposed to foreign currency risk from our Canadian operations. To mitigate risks associated with foreign currency fluctuations, contracts may be denominated in or indexed to the U.S. dollar and/or local inflation rates, or investments may be naturally hedged through debt and other liabilities denominated or issued in the foreign currency.
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These amounts were estimated by considering the effect of the hypothetical interest rates on variable-rate debt outstanding each year. 39 Table of Contents Foreign Currency Risk We are exposed to foreign currency risk from our Canadian operations.

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