DXP ENTERPRISES INC - FORM 8-K/A - EX-99.2 - EXHIBIT 99.2

Attached files

file	filename
8-K/A - DXPE HSE 8K/A - DXP ENTERPRISES INC	dxpe_hse-8ka.htm
EX-99.3 - EXHIBIT 99.3 - DXP ENTERPRISES INC	dxpe_hse8ka-ex993.htm
EX-23.1 - EXHIBIT 23.1 - DXP ENTERPRISES INC	dxpe_hse8ka-ex231.htm
EX-99.1 - EXHIBIT 99.1 - DXP ENTERPRISES INC	dxpe_hse8ka-ex991.htm

Exhibit 99.2

Condensed Consolidated Interim Statement of Financial Position

(stated in thousands of Canadian dollars) (unaudited)	Note		June 30, 2012		December 31, 2011
ASSETS
Cash and cash equivalents		$	6,681	$	2,950
Trade receivables	4		24,637		22,326
Inventory			183		225
Prepaid expenses and other receivables			1,191		1,380
Income taxes recoverable			625		574
Total current assets			33,317		27,455

Property and equipment	12		33,790		27,925
Intangible assets	12		1,935		1,924
Goodwill			380		380
Other receivables			231		220
Deferred tax assets			–		209
Total non-current assets			36,336		30,658

TOTAL ASSETS		$	69,653	$	58,113

LIABILITIES
Trade and other payables		$	7,534	$	6,858
Provisions			246		263
Loans and borrowings	5		4,066		3,372
Income taxes payable			1,934		895
Total current liabilities			13,780		11,388

Provisions			692		811
Loans and borrowings	5		5,656		6,208
Deferred tax liabilities			3,672		2,461
Total non-current liabilities			10,020		9,480

TOTAL LIABILITIES			23,800		20,868

EQUITY
Share capital			62,953		60,654
Convertible debentures – equity component	5		–		229
Contributed surplus			5,147		5,192
Accumulated other comprehensive income (loss)			25		(1)
Deficit			(22,591)		(28,993)
Total equity attributable to equity holders of the Corporation			45,534		37,081
Non-controlling interest			319		164
TOTAL EQUITY			45,853		37,245

TOTAL LIABILITIES AND EQUITY		$	69,653	$	58,113
Subsequent events (note 1) Contingent liabilities (note 11)

See accompanying notes to the condensed consolidated interim financial statements.

Condensed Consolidated interim Statement of Earnings

(stated in thousands of Canadian dollars except per share amounts) (unaudited)	Note		Three months ended June 30				Six months ended June 30
			2012		2011		2012		2011

REVENUE		$	28,476	$	24,905	$	56,658	$	49,386

Direct operating expenses			19,957		19,266		39,788		39,214
Selling, general and administrative			3,923		2,391		6,679		4,438
			4,596		3,248		10,191		5,734

Depreciation of property and equipment			1,595		1,240		2,857		2,478
Amortization of intangibles			142		142		267		245
Share-based compensation			254		38		454		109
Finance costs	7		235		197		461		414
(Gain) Loss on disposal of property and equipment			82		(35)		74		1
Reversal of impairment of property and equipment and intangible assets	12		–		–		(4,136)		–

EARNINGS BEFORE INCOME TAX			2,288		1,666		10,214		2,487

Income taxes:
Current provision			704		766		1,794		826
Deferred tax expense			188		359		1,865		613
			892		1,125		3,659		1,439

NET EARNINGS		$	1,396	$	541	$	6,555	$	1,048

Earnings attributable to:
Owners of the Corporation			1,288		521		6,402		1,020
Non-controlling interest			108		20		153		28
NET EARNINGS FOR THE PERIOD			1,396		541		6,555		1,048

EARNINGS PER SHARE
Basic	8	$	0.03	$	0.01	$	0.16	$	0.03
Diluted	8	$	0.03	$	0.01	$	0.16	$	0.03
WEIGHTED AVERAGE SHARES OUTSTANDING (in thousands)
Basic			40,575		38,713		39,676		38,562
Diluted			41,604		43,203		40,547		42,662

See accompanying notes to the condensed consolidated interim financial statements.

Condensed Consolidated interim Statement of Comprehensive Income

(stated in thousands of Canadian dollars) (unaudited)	Note		Three months ended June 30				Six months ended June 30
			2012		2011		2012		2011

NET EARNINGS		$	1,396	$	541	$	6,555	$	1,048

Other comprehensive income
Foreign currency translation adjustment			87		24		28		(50)
COMPREHENSIVE INCOME			1,483		565		6,583		998

Comprehensive income attributable to
Owners of the Corporation			1,368		542		6,428		972
Non-controlling interest			115		23		155		26
COMPREHENSIVE INCOME FOR THE PERIOD		$	1,483	$	565	$	6,583	$	998

See accompanying notes to the condensed consolidated interim financial statements.

Condensed Consolidated Interim Statement of Changes in Equity

(stated in thousands of Canadian dollars) (unaudited)	Outstanding common shares (thousands)	Share capital	Convertible debentures – equity component	Contributed surplus	Deficit	Accumulated other comprehensive (loss) income	Total equity attributable to equity holders of the Corporation	Non-controlling interest	Total equity
BALANCE AT JANUARY 1, 2012	38,713	$60,654	$229	$5,192	$(28,993)	$ (1)	$ 37,081	$164	$37,245
Net earnings for the period					6,402		6,402	153	6,555
Other comprehensive income						26	26	2	28
Total comprehensive income for the period					6,402	26	6,428	155	6,583
Transactions with owners:
Stock compensation expense				106			106		106
Exercise of stock options	97	197		(151)			46		46
Conversion of convertible debentures (Note 5)	4,000	2,102	(229)				1,873		1,873
BALANCE AT JUNE 30, 2012	42,810	$62,953	$–	$5,147	$(22,591)	$ 25	$45,5347	$319	$45,853
BALANCE AT JANUARY 1, 2011	37,576	$60,040	$221	$4,969	$ (34,851)	$ (83)	$30,2966	$–	$30,296
Net earnings for the period					1,020		1,020	28	1,048
Other comprehensive loss						(48)	(48)	(2)	(50)
Total comprehensive income for the period					1,020	(48)	972	26	998
Transactions with owners:
Issue of common shares on business combination	1,137	614					614		614
Stock compensation expense				91			91		91
Convertible debentures issued – equity component			8				8		8
BALANCE AT JUNE 30, 2011	38,713	$60,654	$229	$5,060	$ (33,831)	$ (131)	$31,981 1	$26	$32,007

See accompanying notes to the consolidated interim financial statements.

Condensed Consolidated Statement of Cash Flows

Six months ended June 30 (stated in thousands of Canadian dollars) (unaudited)	Note		2012		2011

CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings for the period		$	6,555	$	1,048
Adjustments for:
Depreciation and amortization			3,124		2,723
Finance costs	7		461		414
Share-based compensation			454		109
Change in provisions			(137)		(112)
Income tax expense			3,659		1,439
Loss on disposal of property and equipment			74		1
Reversal of impairment of property and equipment and intangible assets	12		(4,136)		–
			10,054		5,622
Change in non-cash working capital	10		(1,699)		(1,789)
Cash generated from operating activities			8,355		3,833
Interest paid			(355)		(290)
Income tax paid			(1,272)		(514)
NET CASH FLOWS FROM OPERATING ACTIVITIES			6,728		3,029

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment			(3,725)		(2,087)
Purchase of intangibles			(24)		(6)
Net cash acquired on business acquisition			–		1
Proceeds from sale of property and equipment			598		294
NET CASH USED IN INVESTING ACTIVITIES			(3,151)		(1,798)

CASH FLOWS FROM FINANCING ACTIVITIES
Issue of loans and borrowings			2,310		75
Repayment of loans and borrowings			(977)		(681)
Payment of finance lease liabilities			(1,210)		(1,336)
Proceeds from exercise of stock options			48		–
Payment of transaction costs related to issue of debt			–		(40)
NET CASH FROM (USED IN) FINANCING ACTIVITIES			171		(1,982)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			3,748		(751)
Cash and cash equivalents at January 1			2,950		1,479
Effect of exchange rate fluctuations on cash held			(17)		(47)
CASH AND CASH EQUIVALENTS AT JUNE 30			6,681		681

Non-cash investing activities – property and equipment acquired by means of a finance lease		$	1,777	$	1,020

See accompanying notes to the condensed consolidated interim financial statements.

Notes to the condensed consolidated interim financial statements for the three and six months ended June 30, 2012 and 2011

(unaudited)

(stated in thousands of Canadian dollars, except per share amounts)

NOTE 1 – REPORTING ENTITY

HSE Integrated Ltd. (“HSE” or the “Corporation”) is incorporated under the laws of the province of Alberta. The address of the Corporation’s head office is 1000, 630 – 6 Avenue S.W., Calgary, Alberta, Canada, T2P 0S8. The condensed consolidated interim financial statements of the Corporation as at and for the three and six months ended June 30, 2012 and 2011 include the Corporation and its subsidiaries.

The Corporation provides health and safety services to a range of customers in the energy, manufacturing, construction and other industries including: safety supervision and rescue personnel, rental of breathing apparatus and associated equipment for personnel operating in high hazard environments, fixed and mobile firefighting and fire protection services and equipment, worker shower (decontamination) services, onsite medical services, worker safety training, hazardous gas detection, industrial hygiene services, and safety consulting and supervision.

The Corporation’s business has two seasonal components. Revenue for Oilfield health and safety services is historically highest in the first and fourth quarters and lowest in the second quarter because this sector uses equipment that can only access well locations during certain times of the year and because of the effects of weather on field activity. Industrial revenue includes a mix of year-round contracts and “turnarounds” – scheduled major maintenance projects and repair activities on client facilities. These turnarounds tend to be scheduled during the second and third quarters to avoid the possibility of adverse effects from freezing weather. As a result, Industrial revenue tends to be highest in the second and third quarters.

· Subsequent Event - Business Combination

On July 11, 2012, DXP Enterprises, Inc. ("DXP") through its wholly-owned subsidiary, acquired all of the outstanding common shares of HSE by way of a plan of arrangement under the Business Corporations Act (Alberta) (the "Arrangement"). As announced on June 29, 2012, the Arrangement was approved at the Annual and Special Meeting of Shareholders of HSE on June 29, 2012 by 99.96 % of the votes cast by the HSE shareholders and 99.96% of the votes cast by the HSE shareholders after excluding those votes required to be excluded by Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions. The Arrangement was also approved by the Court of Queen's Bench of Alberta on June 29, 2012.

Pursuant to the Arrangement, HSE shareholders received $1.80 in cash per each common share of HSE held.

Subsequent to the period, as a result of the change of control, HSE’s credit facilities became due on demand and were reclassified entirely to current liabilities.

HSE common shares were de-listed from the Toronto Stock Exchange three business days following the transaction.

NOTE 2 – BASIS OF PREPARATION

A) Statement of compliance

These unaudited condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. The condensed consolidated interim financial statements do not include all of the information required for full annual financial statements.

These condensed consolidated interim financial statements were authorized for issue by DXP Enterprise Inc.’s board of directors on September 24, 2012.

B) Basis of measurement

The condensed consolidated interim financial statements have been prepared on the historical cost basis except for liabilities for cash-settled share-based payment arrangements, which are measured at fair value.

C) Functional and presentation currency

These condensed consolidated interim financial statements are presented in Canadian dollars, which is the functional currency of the Corporation and the Corporation’s Canadian subsidiaries. The U.S. dollar is the functional currency of the Corporation’s United States subsidiaries. All financial information presented in Canadian dollars has been rounded to the nearest thousand, except for per share amounts.

D) Use of accounting estimates and judgments

The preparation of consolidated interim financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Corporation’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended December 31, 2011.

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with Note 3 to HSE Integrated Ltd.’s annual consolidated financial statements for the year ended December 31, 2011, as the accounting policies applied by the Corporation in these unaudited consolidated interim financial statements are the same as those disclosed therein.

NOTE 4 – TRADE RECEIVABLES

	June 30, 2012		December 31, 2011
Trade receivables	$	24,987	$	22,676
Allowance for doubtful accounts		(350)		(350)
	$	24,637	$	22,326

The aging of trade receivables at the reporting date was:

		Gross		Allowance		Gross		Allowance
		June 30, 2012		June 30, 2012		December 31, 2011		December 31, 2011

0 – 30 days from invoice date (current)	$	17,210	$	–	$	12,411	$	–
31-60 days from invoice date		5,917		–		6,839		–
61-120 days from invoice date		1,663		153		1,894		31
More than 120 days from invoice date		197		197		1,532		319
Total	$	24,987	$	350	$	22,676	$	350

The movement in the allowance for doubtful accounts in respect of trade receivables during the period was as follows:



Balance at January 1, 2012		350
Bad debt provision		56
Write-offs		(56)
Balance at June 30, 2012	$	350

NOTE 5 – LOANS AND BORROWINGS

This note provides information about the contractual terms of the Corporation’s interest-bearing loans and borrowings.

	Note	June 30, 2012		December 31, 2011
Current liabilities:
Non-revolving term facility	A	$	2,085	$	1,304
Finance lease liabilities	C		1,981		2,068
		$	4,066	$	3,372
Non-current liabilities:
Non-revolving term facility	A		2,292		1,739
Unamortized debt issue costs	A		(98)		(125)
Convertible debentures	B		–		1,845
Unamortized debt issue costs	B		–		(57)
Finance lease liabilities	C		3,462		2,806
		$	5,656	$	6,208
Total loans and borrowings		$	9,722	$	9,580

A) Non-revolving term facility and revolving operating loan facility

On February 15, 2012 the Corporation completed the purchase of certain assets of the Flint Safety Unit ("Flint Safety Unit") a division of Flint Field Services Ltd. The transaction was financed through the non-revolving term facility. The facility is repayable in monthly payments of $65 starting on February 29, 2012 and is payable in full 36 months after initial drawdown. As at June 30, 2012, the amount drawn under the credit facility was $4,337. This facility is covered by the Corporation’s general security agreement, and is subject to the same covenants as the facilities disclosed in the consolidated financial statements as at and for the period ended December 31, 2011.

B) Convertible debentures

On November 9, 2010, HSE announced the issue of up to $2,000 in subordinated secured convertible debentures (the “Debentures”). The Debentures matured on January 15, 2014 and bore interest at 10.0% per annum, payable quarterly in arrears on April 15, July 15, October 15, and January 15 in each year beginning April 15, 2011. The component parts of the convertible secured subordinated debentures (“Debentures”) issued by the Corporation were classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

On December 21, 2010, HSE completed the first closing with total proceeds of $1,925. On January 18, 2011, HSE completed the final closing with proceeds of an additional $75.

As at June 30, 2012, all convertible debentures had been converted.

C) Finance lease liabilities

Finance lease liabilities are payable as follows:

	June 30, 2012			December 31, 2011
	Future minimum lease payments	Interest	Present value of minimum lease payments	Future minimum lease payments	Interest	Present value of minimum lease payments
Less than 1 year	$ 2,193	$ 212	$ 1,981	$ 2,262	$ 194	$ 2,068
1 to 5 years	3,701	239	3,462	3,010	204	2,806
	$ 5,894	$ 451	$ 5,443	$ 5,272	$ 398	$ 4,874

Leasing arrangements

Finance leases relate to vehicles and equipment with lease terms ranging from 3 to 5 years. The Corporation’s obligations under finance leases are secured by the lessors’ title to the leased assets.

The applicable interest rate on these finance leases is between 2.58% and 6.16%.

NOTE 6 – SHARE-BASED COMPENSATION

A) Stock options

Pursuant to the stock option plan, a maximum of 10% of the issued and outstanding common shares of the Corporation are reserved from time to time for issue to eligible participants. The directors determine option prices and vesting terms at the time of granting at an exercise price based on the volume weighted average price for the five trading days immediately preceding the grant date. The term of options granted does not exceed five years.

At June 30, 2012, the Corporation had options outstanding to issue 1,712,500 shares (December 31, 2011: 2,167,000) at a weighted average price of $0.57 per share (December 31, 2011: $0.71). Of these options, 1,220,855 were exercisable (December 31, 2011: 1,104,446).

As a result of the business combination with DXP Enterprises Inc. (Note 1) all outstanding vested and unvested stock options were settled in cash subsequent to the period ended June 30, 2012. The settlement amount per share was equal to the difference between the $1.80 purchase price per share outlined in the Plan of Arrangement, and the exercise price of the options.

The inputs used in the measurement of the fair values at grant date are the same as those disclosed in the consolidated financial statements as at and for the period ended December 31, 2011.

Information about outstanding stock options is as follows:

	Six months ended June 30, 2011			Year ended December 31, 2011
	Options	Weighted average exercise price		Options	Weighted average exercise price
Outstanding, beginning of year	2,167,000	$	0.71	2,279,165	$	1.24
Granted	40,000		0.43	500,000		0.52
Exercised	(96,500)		1.10	–		–
Forfeited	(398,000)		1.17	(612,165)		2.53
Outstanding, end of period	1,712,500	$	0.57	2,167,000	$	0.71
Exercisable at end of period	1,220,855	$	0.60	1,104,446	$	0.92

The following table summarizes information about stock options outstanding at:

			June 30, 2012
Options Outstanding	Exercise Prices ($)	Weighted Average Remaining Life in Years	Number Exercisable
889,167	0.36 – 0.50	2.3	717,508
823,333	0.51 – 1.00	2.5	503,347
1,712,500	0.57	2.4	1,220,855

			December 31, 2011
Options Outstanding	Exercise Prices ($)	Weighted Average Remaining Life in Years	Number Exercisable
1,055,000	0.36 – 0.50	3.0	477,446
840,000	0.51 – 1.00	3.1	355,000
272,000	1.51 – 2.00	0.2	272,000
2,167,000	0.71	2.7	1,104,446

B) Deferred share unit plan (cash settled)

Expense related to the deferred share units recognized during the six months ended June 30, 2012 was $348 (2011: $18). For the year 2010 and up to August 11, 2011, the majority of directors’ retainers and meeting fees were paid with deferred share units (“DSUs”). After August 11, 2011, all directors’ retainers and meeting fees are being paid in cash except for an annual grant for non-executive directors as provided in the original DSU plan.

As a result of the business combination with DXP Enterprises Inc. (Note 1) all outstanding deferred share units were settled in cash at $1.80 per unit subsequent to the end of the period ended June 30, 2012.

The number of deferred share units is as follows:

Deferred Share Units	June 30, 2012	December 31, 2011
Outstanding, beginning of year	303,039	257,028
Granted	–	102,241
Redeemed	–	(56,230)
Outstanding, end of period	303,039	303,039

NOTE 7 – FINANCE COSTS

		Three months ended June 30				Six months ended June 30
		2012		2011		2012		2011

Interest on operating loan facility and standby charges		8		13		17		22
Interest on term facility		54		45		106		106
Interest on obligations under finance leases		73		50		136		108
Interest, accretion interest on convertible debentures		28		75		103		151
Amortization of deferred financing costs		71		11		84		20
Unwind of discount on provision		2		3		5		6
Foreign currency gain (loss)		(1)		–		10		1
Net finance costs recognized in earnings	$	235	$	197	$	461	$	414

Interest paid	$	180	$	173	$	355	$	290

NOTE 8 – EARNINGS PER SHARE

A) Basic earnings per share

Basic earnings per share is calculated as follows:

		Three months ended June 30				Six months ended June 30
		2012		2011		2012		2011
Earnings attributable to common shareholders	$	1,288	$	521	$	6,402	$	1,020
Issued common shares, beginning of period (thousands)		38,793		38,713		38,713		37,576
Weighted average common shares issued on acquisition		–		–		–		986
Weighted average common shares issued on exercise of stock options		58				29
Weighted average common shares issued on conversion of debentures		1,724		–		934		–
Weighted average number of common shares, issued and outstanding		40,575		38,713		39,676		38,562
Basic earnings per share	$	0.03	$	0.01	$	0.16	$	0.03

B) Diluted earnings per share

In calculating diluted earnings per share, basic earnings per share was adjusted as follows:

		Three months ended June 30				Six months ended June 30
		2012		2011		2012		2011
Net earnings	$	1,288	$	521	$	6,402	$	1,020
Effect of finance costs from conversion of convertible debenture (net of tax)		–		35		–		70
Adjusted net earnings	$	1,288	$	556	$	6,402	$	1,090
Weighted average number of common shares – Basic (thousands)		40,575		38,713		39,676		38,562
Effect of “in-the-money” stock options		1,029		495		871		100
Effect of conversion of convertible debentures		–		4,000		–		4,000
Weighted average number of common shares at end of period – Diluted thousands)		41,604		43, 208		40,547		42,662
Fully diluted earnings per share	$	0.03	$	0.01	$	0.16	$	0.03

NOTE 9 – OPERATING SEGMENTS

The Corporation operates in two main geographic areas: Canada and the United States (U.S.). Each geographic area has a President or Chief Operating Officer (COO) responsible for the operations and strategy of his area’s business. Personnel working within a particular region report to the President or COO, and the President or COO reports to the Chief Executive Officer. Many of the Corporation’s services are inter-dependent since they are bundled and sold to its customers in various combinations.

HSE provides a comprehensive and integrated suite of health, safety and environmental monitoring services to protect workers, assets and the community in the most cost-effective manner possible. It provides these services by providing people and assets to meet the needs of its customers. These people and assets are inter-dependent and moved between locations on a national basis, and are not site-specific or customer-specific. The Corporation tracks revenue, but not expenses or resources based on the industry within which the customer operates. The same property and equipment and employees serve customers in both industry categories. Decisions are made by the Corporation to allocate resources based on the geographic segment and not by industry.

Within each geographic segment, the Corporation uses common resources to provide services to a variety of customer industries. The Corporation groups these customer industries into two categories. “Oilfield” services are provided to customers in the conventional upstream, or “wellhead”, sector of the oil and gas industry. “Industrial” services are provided to customers in a variety of other industries including: non-conventional upstream oil development and production (including oilsands extraction); oil and gas processing; petrochemicals; pulp and paper; utilities; power generation; and manufacturing. It also includes worker safety training and safety management services.

Performance is measured based on segment EBITDA, as included in the internal management reports that are reviewed by the Corporation’s CEO. Segment EBITDA is used to measure performance as management believes that such information is the most relevant in evaluating results in comparison with other entities operating in the same industry.

For the three months ended June 30, 2012 one customer provided more than 10% of the Corporation’s revenue. Sales to these customers during 2012 amounted to $7,005 related to oilfield service and well control projects located entirely in Canada. For the same period in 2011, one customer provided more than 10% of the Corporation’s revenue. Sales to this customer amounted to $3,032 during the period, related to long-term energy related projects located entirely within Canada.

Corporate division expenses consist of salary expenses; stock compensation; office costs related to corporate employees; and public company costs.

Information regarding the results of each reportable segment is as follows.

Information about reportable segments

Three months ended June 30

		Canada				U.S.				Corporate				Total
		2012		2011		2012		2011		2012		2011		2012		2011
External revenue
Oilfield	$	10,376	$	7,339	$	2,839	$	867	$	–	$	–	$	13,215	$	8,206
Industrial		14,656		16,165		605		534		–		–		15,261		16,699
Total revenue	$	25,032		23,504	$	3,444		1,401	$	–		–	$	28,476		24,905
Finance costs		–		–		–		–		235		197		235		197
Depreciation and amortization		1,582		1,318		155		64		–		–		1,737		1,382
Income tax expense		449		1,065		443		60		–		–		892		1,125
Capital expenditures		445		519		527		342		–		–		972		861
Material non-cash items
Change in onerous contract provision		(71)		(55)		–		–		–		–		(71)		(55)
Property and equipment acquired by means of a finance lease		1,232		0		321		177		–		–		1,533		177
Reversal of impairment of property and equipment and intangible assets		–		–		–		–		–		–		–		–
Reportable segment earnings (loss) before depreciation, amortization, share-based compensation, finance costs, gain/loss on disposal of property and equipment, and reversal of impairment of property and equipment and intangible assets	$	7,154	$	5,221	$	1,366	$	418	$	(3,924)	$	(2,391)	$	4,596	$	3,248

Six months ended June 30

		Canada				U.S.				Corporate				Total
		2012		2011		2012		2011		2012		2011		2012		2011
External revenue
Oilfield	$	25,181	$	18,728	$	4,837	$	1,402	$	–	$	–	$	30,018	$	20,130
Industrial		25,540		28,220		1,100		1,036		–		–		26,640		29,256
Total revenue	$	50,721	$	46,948	$	5,937	$	2,438	$	–	$	–	$	56,658	$	49,386
Finance costs		–		–		–		–		461		414		461		414
Depreciation and amortization		2,857		2,602		267		121		–		–		3,124		2,723
Income tax expense (recovery)		2,706		1,331		953		108		–		–		3,659		1,439
Capital expenditures		2,819		1,421		906		666		–		–		3,725		2,087
Material non-cash items
Change in onerous contract provision		(137)		(112)		–		–		–		–		(137)		(112)
Property and equipment acquired by means of a finance lease		1,280		624		497		396		–		–		1,777		1,020
Reversal of impairment of property and equipment and intangible assets		(3,935)		–		(201)		–		–		–		(4,136)		–
Reportable segment earnings (loss) before depreciation, amortization, share-based compensation, finance costs, gain/loss on disposal of property and equipment, and reversal of impairment of property and equipment and intangible assets	$	14,629	$	9,492	$	2,241	$	680	$	(6,679)	$	(4,438)	$	10,191	$	5,734

NOTE 10 – SUPPLEMENTARY CASH FLOW INFORMATION

Six months ended June 30		2012		2011
Changes in non-cash working capital from operations
Inventories	$	42	$	–
Prepaid expenses and other receivables		189		501
Trade receivables		(2,289)		(3,188)
Trade and other payables		359		898
Change in non-cash working capital	$	(1,699)	$	(1,789)

NOTE 11 – CONTINGENT LIABILITIES

In the ordinary course of business activities, the Corporation may be contingently liable for litigation and claims with customers, suppliers, former employees, and third parties. Management believes that adequate provisions have been recorded in the accounts where applicable. Although it may not be possible to estimate accurately the extent of potential costs and losses, if any, Management believes that the ultimate resolution of such contingencies would not have a material effect on the financial position of the Corporation.

NOTE 12 – IMPAIRMENT REVERSAL

As a result of the Agreement with DXP (note 1), objective external evidence indicated that the fair value of property and equipment exceeded its carrying value at March 31, 2012. This external evidence, in addition to strong financial performance through 2011 and for the first quarter of 2012, indicated that the impairment of property and equipment and intangible assets recorded on January 1, 2010, no longer existed and should be reversed as at March 31, 2012. For the three months ended March 31, 2012, the Corporation recorded an impairment reversal of $4,136, net of the depreciation and amortization that would have been recorded on the assets from January 1, 2010 to March 31, 2012.

DXP ENTERPRISES INC - FORM 8-K/A - EX-99.2 - EXHIBIT 99.2 - September 25, 2012

Attached files

DXP ENTERPRISES INC Reports