Financial Data and Key Metrics Changes - Total sales for Q1 2021 increased sequentially by 5.6% to $245.6 million, with average daily sales rising from $3.8 million in Q4 to $3.9 million in Q1 [27][28] - Gross profit margins improved to 29.2%, reflecting a 152 basis point increase over Q4 [21][33] - Adjusted EBITDA for Q1 was $13.9 million, with EBITDA margins at 5.7% [39] Business Line Data and Key Metrics Changes - Service Centers experienced a sequential sales growth of 15.6%, while Supply Chain Services grew by 0.5% [27] - Innovative Pumping Solutions (IPS) saw a decline in operating income margins by 332 basis points, primarily due to higher SG&A costs [36] - Acquisitions contributed $28.4 million in sales during the quarter, enhancing overall performance [27][14] Market Data and Key Metrics Changes - Industrial end-markets, which constitute 67% of the business, showed positive upward movement, with the ISM PMI manufacturing index rising from 58.7% in January to 64% in March [8][9] - Oil and gas, making up 33% of the business, showed mixed recovery signs, particularly in international markets [11][12] Company Strategy and Development Direction - The company aims to grow all markets with a balanced end-market exposure, focusing on food and beverage, water and wastewater, and chemicals [17] - The acquisition strategy is a key component for growth, with recent acquisitions expected to contribute positively to future performance [44][45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to pre-pandemic growth levels, highlighting strong free cash flow generation and market condition improvements [6][7][23] - The company is cautious about the oil and gas sector, noting that capital budgets are expected to remain flat to slightly down domestically, while international projects show more promise [12][54] Other Important Information - The company generated $11.2 million in free cash flow during Q1, supporting ongoing acquisition efforts [15][42] - Total debt outstanding was $329.2 million, reflecting a refinancing of Term Loan B, which provides additional flexibility [43] Q&A Session Summary Question: How did April look and what are the segment trends? - Management noted a strong exit rate for March with early estimates for April showing $4.6 million in sales per business day, indicating positive momentum [49][50] Question: What are the dynamics of cost inflation in the supply chain? - Management acknowledged seeing price increases and delivery issues, indicating potential inflationary pressures but noted that they can pass on costs to customers [56][57] Question: How will SG&A costs be managed as revenue increases? - Management indicated that they retained talent during the pandemic and expect to leverage this as revenue grows, targeting an EBITDA margin of around 8% [64][65] Question: What does the acquisition pipeline look like? - Management confirmed a robust acquisition pipeline with high visibility on upcoming deals, particularly in water and wastewater and food and beverage sectors [66][70]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [ ☒ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2021 or [ ☐ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission file number 0-21513 DXP Enterprises, Inc. (Exact name of registrant as specified in its charter) Texas 76-0509661 | --- | |----------- ...

PART I [Business](index=5&type=section&id=Item%201.%20Business) DXP Enterprises distributes MRO products and services through its Service Centers, Supply Chain Services, and Innovative Pumping Solutions segments [Company and Industry Overview](index=5&type=section&id=Company%20and%20Industry%20Overview) DXP's sales grew to $1.0 billion in 2020 by capitalizing on industry trends like consolidation and demand for integrated services - DXP's total sales increased from **$125 million** in 1996 to **$1.0 billion** in 2020, operating from 168 locations across the U.S., Canada, and Dubai as of December 31, 2020[17](index=17&type=chunk) - The company identifies three primary trends in the industrial supply industry: **industry consolidation, customized integrated service, and single-source distribution**[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk) [Business Segments](index=7&type=section&id=Business%20Segments) The company operates through three segments, with Service Centers contributing the majority of sales in 2020 2020 Sales and Operations by Business Segment | Segment | 2020 Sales (millions) | % of Sales | Key End-Markets | Locations | | :--- | :--- | :--- | :--- | :--- | | SC | $662.6 | 65.9% | Oil & Gas, Food & Beverage, General Industrial, Chemical, Transportation, Aerospace | 154 service centers | | IPS | $188.0 | 18.7% | Oil & Gas, Mining, Petrochemical, & Utilities | 10 fabrication facilities | | SCS | $154.7 | 15.4% | Food & Beverage, Transportation, Oil & Gas, General Industrial & Chemical | 79 customer facilities' sites | - The Service Centers (SC) segment provides MRO products and services from 154 service centers and 4 distribution centers, serving industries like oil and gas, food and beverage, and petrochemicals[27](index=27&type=chunk)[28](index=28&type=chunk) - The Innovative Pumping Solutions (IPS) segment provides integrated, custom pump skid packages and its backlog was **$46.6 million** at December 31, 2020, a significant decrease from **$101.1 million** at the end of 2019[32](index=32&type=chunk)[38](index=38&type=chunk) - The Supply Chain Services (SCS) segment manages customer procurement and inventory through long-term contracts, operating at 79 customer facilities as of year-end 2020[40](index=40&type=chunk)[44](index=44&type=chunk) [Products and Recent Acquisitions](index=9&type=section&id=Products%20and%20Recent%20Acquisitions) DXP offers a broad product range and pursues a growth strategy centered on acquisitions, completing six in 2020 - DXP's five key product categories are: rotating equipment, bearings & power transmission, industrial supplies, metal working, and safety products & services[46](index=46&type=chunk) - On December 31, 2020, DXP completed four acquisitions: **TEC for ~$64.7M, APO for ~$38.3M, Pumping Solutions for ~$21.0M, and CEC for ~$4.5M**, all paid in cash and stock[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) - Earlier in 2020, DXP acquired **Turbo Machinery Repair for ~$3.2M** in cash and **Pumping Systems, Inc. for ~$13.0M** in cash and stock[59](index=59&type=chunk) [Human Capital and Executive Officers](index=12&type=section&id=Human%20Capital%20and%20Executive%20Officers) The company employed 2,550 people as of year-end 2020 and focused on safety and talent development while operating as an essential business Employee Headcount by Segment (as of Dec 31, 2020) | Business Segment | Employees | | :--- | :--- | | Service Centers | 1,605 | | Innovative Pumping Solutions | 327 | | Supply Chain Services | 347 | | Corporate | 271 | | **Total Employees** | **2,550** | - DXP's human capital strategy emphasizes talent development, employee safety (with a goal of zero accidents), a decentralized entrepreneurial culture, and competitive benefits[69](index=69&type=chunk)[70](index=70&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) - During the COVID-19 pandemic, DXP operated as an **"essential" business**, implementing work-from-home policies for office staff and safety measures for warehouse and distribution center employees[78](index=78&type=chunk) [Risk Factors](index=15&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks related to business operations, market conditions, credit access, and legal compliance - **Business and Operations Risks:** Competition, potential cancellation of distribution authorizations by manufacturers, reliance on key personnel and suppliers, challenges in executing acquisition strategy, and cybersecurity breaches[92](index=92&type=chunk) - **Market and Economy Risks:** The COVID-19 pandemic has caused supply chain disruptions, decreased customer demand, and lower oil prices, while the business is also sensitive to economic slowdowns and energy industry downturns[93](index=93&type=chunk)[118](index=118&type=chunk)[124](index=124&type=chunk) - **Credit and Capital Risks:** Inability to refinance debt on favorable terms, failure to comply with financial covenants in credit facilities, and potential difficulties in accessing acquisition financing[94](index=94&type=chunk) - **Legal and Regulatory Risks:** Potential for significant product liability and warranty claims, shareholder litigation due to stock price volatility, and risks associated with foreign operations and environmental regulations[95](index=95&type=chunk)[141](index=141&type=chunk)[145](index=145&type=chunk) [Properties](index=21&type=section&id=Item%202.%20Properties) DXP operated from 168 facilities as of year-end 2020, the majority of which are leased - The company operates **168 facilities**, including 154 service centers, 4 distribution centers, and 10 fabrication facilities[151](index=151&type=chunk) - The majority of facilities are leased, with **only seven being owned** by the company, and leased facilities range in size from approximately 570 to 105,000 square feet[151](index=151&type=chunk)[153](index=153&type=chunk) [Legal Proceedings](index=22&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings not expected to have a material adverse effect - DXP is party to various legal proceedings from the ordinary course of business but **does not expect them to have a material adverse effect** on its financials[154](index=154&type=chunk) PART II [Market for the Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities](index=23&type=section&id=Item%205.%20Market%20for%20the%20Registrant's%20Common%20Equity%2C%20Related%20Shareholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ under 'DXPE', and it does not anticipate paying dividends - The company's common stock trades on the NASDAQ under the ticker **DXPE**[158](index=158&type=chunk) - DXP **does not anticipate paying cash dividends** on its common stock in the foreseeable future[159](index=159&type=chunk) - Unregistered shares were issued as part of the consideration for the acquisitions of TEC, APO, Pumping Solutions, CEC, and PSI in 2020[164](index=164&type=chunk)[165](index=165&type=chunk) [Selected Financial Data](index=25&type=section&id=Item%206.%20Selected%20Financial%20Data) A five-year financial summary shows a significant decline in 2020, with sales of $1.005 billion and a net loss of $29.1 million Five-Year Selected Financial Data (in thousands, except per share amounts) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Sales | $1,005,266 | $1,267,189 | $1,216,197 | $1,006,782 | $962,092 | | Gross Profit | $279,269 | $347,224 | $332,208 | $271,581 | $264,802 | | Operating Income (Loss) | $(26,870) | $66,122 | $68,451 | $33,490 | $19,332 | | Net Income (Loss) | $(29,074) | $35,775 | $35,521 | $16,529 | $7,151 | | Diluted EPS (Loss) | $(1.62) | $1.96 | $1.94 | $0.93 | $0.49 | | Total Assets | $851,861 | $788,220 | $699,962 | $639,083 | $602,052 | | Total Debt | $330,000 | $244,375 | $245,309 | $248,716 | $174,323 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 20.7% sales decline and net loss in 2020 to the pandemic and energy sector downturn [Current Market Conditions and Outlook](index=26&type=section&id=Current%20Market%20Conditions%20and%20Outlook) The COVID-19 pandemic drove a sharp drop in demand, prompting cost reductions and an increased ABL facility - The COVID-19 pandemic and a related oil price collapse drove a sharp erosion in demand, and in response, the company took mitigation steps including cost cuts and increasing its ABL revolver from **$85 million to $135 million**[178](index=178&type=chunk)[179](index=179&type=chunk) - DXP was exempted as an **"essential" business** under various government orders, allowing warehouses and distribution centers to remain open with enhanced safety protocols[182](index=182&type=chunk) Key Economic Indicators (2020 vs. 2019) | Indicator | 2020 Average | 2019 Average | | :--- | :--- | :--- | | U.S. Active Drilling Rigs | 436 | 944 | | West Texas Intermediate (WTI) Oil Price | $39.16 | $56.98 | | Purchasing Managers Index (PMI) | 52.5 | 51.3 | [Consolidated Results of Operations (2020 vs. 2019)](index=29&type=section&id=Consolidated%20Results%20of%20Operations%20(2020%20vs.%202019)) Sales decreased 20.7% to $1.0 billion in 2020, resulting in a net loss of $28.9 million driven by impairment charges Sales by Business Segment (2020 vs. 2019, in thousands) | Segment | 2020 | 2019 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Service Centers | $662,617 | $762,256 | $(99,639) | (13.1)% | | Innovative Pumping Solutions | $187,991 | $303,655 | $(115,664) | (38.1)% | | Supply Chain Services | $154,658 | $201,278 | $(46,620) | (23.2)% | | **Total DXP Sales** | **$1,005,266** | **$1,267,189** | **$(261,923)** | **(20.7)%** | - Gross profit margin **increased by 38 basis points to 27.8%**, primarily due to improved margins in the IPS and SCS segments[199](index=199&type=chunk) - The company recorded **$59.9 million in impairment and other charges** in 2020, with none in 2019, including goodwill and asset write-downs for the Canadian SC and IPS segments[204](index=204&type=chunk)[205](index=205&type=chunk) - Selling, General & Administrative (SG&A) expenses **decreased by 12.4% to $246.3 million**, reflecting cost reduction actions[203](index=203&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Cash from operations increased to $107.7 million, and the company refinanced its debt with a new $330 million term loan Summary of Cash Flows (in thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $107,675 | $41,306 | | Net cash used in investing activities | $(121,796) | $(22,085) | | Net cash provided by (used in) financing activities | $77,406 | $(6,092) | - **Free Cash Flow** (a non-GAAP measure) was **$101.1 million** in 2020, a substantial increase from $19.2 million in 2019[238](index=238&type=chunk)[240](index=240&type=chunk) - In December 2020, DXP entered into a new seven-year, **$330 million Senior Secured Term Loan B**, replacing its previous term loan[235](index=235&type=chunk)[245](index=245&type=chunk) - The company increased its asset-based loan (ABL) facility from **$85 million to $135 million** and had **$131.9 million available** at year-end[237](index=237&type=chunk)[253](index=253&type=chunk) [Critical Accounting Policies](index=39&type=section&id=Critical%20Accounting%20Policies) Key accounting policies requiring significant judgment include goodwill impairment, revenue recognition, and acquisition accounting - **Receivables and Credit Risk:** The allowance for doubtful accounts is based on aging, customer-specific situations, and economic factors, with a notable concentration of customers in the energy industry[263](index=263&type=chunk)[265](index=265&type=chunk) - **Impairment of Goodwill and Long-Lived Assets:** Annual impairment tests require significant management judgment, and triggering events in 2020 led to a **$36.4 million goodwill impairment**[267](index=267&type=chunk)[269](index=269&type=chunk)[274](index=274&type=chunk) - **Revenue Recognition:** For the IPS segment, revenue on long-term contracts is recognized over time using the **percentage-of-completion (cost-to-cost) method**, which requires extensive estimation[281](index=281&type=chunk) - **Purchase Accounting:** Fair value of assets and liabilities from acquisitions is estimated using valuation techniques, including for contingent consideration, which involves significant judgment about future performance[285](index=285&type=chunk)[286](index=286&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=45&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks are interest rate volatility on its variable-rate debt and foreign currency fluctuations - A hypothetical **100 basis point increase** in average short-term interest rates would increase annual interest expense by an estimated **$3.3 million** before tax[293](index=293&type=chunk) - The company is exposed to foreign currency risk from its Canadian operations; an average **10% devaluation of the Canadian dollar** in 2020 would have resulted in an estimated **$0.4 million net loss** on the translation of local currency earnings[294](index=294&type=chunk) [Financial Statements and Supplementary Data](index=47&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the audited consolidated financial statements and the independent auditor's unqualified opinion [Report of Independent Registered Public Accounting Firm](index=48&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The independent auditor issued an unqualified opinion on the financial statements and internal controls - The auditor issued an **unqualified opinion** on both the financial statements and the effectiveness of internal control over financial reporting[303](index=303&type=chunk) - Critical Audit Matters identified were: 1. Goodwill and Other Intangibles Impairment Assessment, due to significant judgments in estimating fair value 2. Valuation of Acquired Intangible Assets from the TEC and APO acquisitions 3. Accounting for Uncertain Tax Positions, specifically related to Federal Research & Development Credits[311](index=311&type=chunk)[318](index=318&type=chunk)[323](index=323&type=chunk) [Consolidated Financial Statements](index=52&type=section&id=Consolidated%20Financial%20Statements) The financial statements reflect a net loss of $29.1 million in 2020, with increased assets and debt due to acquisitions and refinancing Consolidated Statement of Operations Highlights (in thousands) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Sales | $1,005,266 | $1,267,189 | | Gross Profit | $279,269 | $347,224 | | Impairment and other charges | $59,883 | $0 | | Operating Income (Loss) | $(26,870) | $66,122 | | Net Income (Loss) | $(29,074) | $35,775 | Consolidated Balance Sheet Highlights (in thousands) | Metric | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Cash | $117,353 | $54,203 | | Total Current Assets | $406,583 | $408,481 | | Goodwill | $248,339 | $194,052 | | Total Assets | $851,861 | $788,220 | | Total Debt (Current & Long-term) | $320,439 | $237,919 | | Total Liabilities | $503,995 | $443,272 | | Total Equity | $347,866 | $344,948 | Consolidated Statement of Cash Flows Highlights (in thousands) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Cash from Operating Activities | $107,675 | $41,306 | | Cash used in Investing Activities | $(121,796) | $(22,085) | | Cash from Financing Activities | $77,406 | $(6,092) | | Net Change in Cash | $63,117 | $13,808 | [Notes to Consolidated Financial Statements](index=57&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Key disclosures include a $59.9 million impairment charge, details of six acquisitions, and a major debt refinancing - **Note 4 - Impairments:** The company recorded **$59.9 million in impairment and other charges** in 2020, consisting of $36.4 million for goodwill, $4.8 million for long-lived assets, and $18.7 million for inventory, primarily due to the oil price collapse and COVID-19 impact[382](index=382&type=chunk)[389](index=389&type=chunk) - **Note 11 - Long-Term Debt:** In December 2020, DXP entered into a new seven-year, **$330 million Senior Secured Term Loan B**, replacing its previous facility, with an interest rate of 5.75% at year-end[427](index=427&type=chunk)[429](index=429&type=chunk)[433](index=433&type=chunk) - **Note 17 - Business Acquisitions:** DXP completed six acquisitions in 2020 for total consideration of **$144.6 million** ($115.2 million in cash and $29.4 million in stock), adding **$90.7 million in goodwill**[462](index=462&type=chunk)[463](index=463&type=chunk)[464](index=464&type=chunk)[472](index=472&type=chunk)[477](index=477&type=chunk) 2020 Segment Performance (in thousands) | Segment | Revenue | Operating Income* | | :--- | :--- | :--- | | Service Centers | $662,617 | $70,385 | | Innovative Pumping Solutions | $187,991 | $18,715 | | Supply Chain Services | $154,658 | $13,218 | | **Total** | **$1,005,266** | **$102,318** | *Operating income for reportable segments, before corporate expenses and other adjustments.* [Controls and Procedures](index=85&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management and the independent auditor concluded that the company's disclosure controls and internal controls were effective - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2020[509](index=509&type=chunk) - Management concluded that the company's internal control over financial reporting was **effective** as of December 31, 2020, a conclusion audited and affirmed by Moss Adams LLP[512](index=512&type=chunk)[513](index=513&type=chunk) PART III [Directors, Executive Officers, Corporate Governance, Executive Compensation, and Other Matters](index=87&type=section&id=Items%2010-14) Required information for Items 10-14 is incorporated by reference from the company's 2021 proxy statement - Information for Items 10, 11, 12, 13, and 14 is **incorporated by reference** from the forthcoming 2021 Proxy Statement[519](index=519&type=chunk)[520](index=520&type=chunk)[521](index=521&type=chunk)[522](index=522&type=chunk)[524](index=524&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=87&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed as part of the Form 10-K report - This item lists all financial statements, schedules, and exhibits filed with the Form 10-K[526](index=526&type=chunk)[527](index=527&type=chunk) - Exhibits filed include the CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906, and Inline XBRL data files[533](index=533&type=chunk)[534](index=534&type=chunk)[535](index=535&type=chunk)

Financial Data and Key Metrics Changes - DXP's Q4 sales increased 5.7% sequentially to $232.7 million, reflecting improvements from trough levels in Q3 [31] - Total sales for fiscal 2020 were $1 billion, down 20.7% compared to fiscal 2019 [31] - Average daily sales for Q4 were $3.8 million, down from $4.8 million in Q4 2019 [32] - DXP generated $101 million in free cash flow for fiscal 2020 [45] - Adjusted EBITDA for fiscal 2020 was $59.5 million, with adjusted EBITDA margins at 5.9% [41] Business Line Data and Key Metrics Changes - Service centers experienced a 13.1% year-over-year decline, while supply chain services declined 23.2%, and innovative pumping solutions (IPS) declined 38.1% [33] - IPS and supply chain services saw sequential sales growth of 62.8% and 7.1%, respectively, in Q4 [31][27] - Gross margins improved to 27.8%, a 40 basis point increase over 2019, with IPS gross margins improving by 79 basis points year-over-year [21][37] Market Data and Key Metrics Changes - Key end markets driving sales performance included food and beverage, mining, municipal, and specialty chemicals [33] - The oil and gas market is showing signs of improvement, but capital budgets remain cut back, indicating a slow recovery [51] Company Strategy and Development Direction - DXP aims to diversify its exposure to oil and gas to about 20% while focusing on stable markets such as water and wastewater, food and beverage, and alternate energies [53][55] - The company plans to continue its acquisition strategy to enhance market share and capabilities in key geographic regions [47] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for recovery in the oil and gas sector as COVID-19 vaccines are deployed [51][26] - The company remains cautious about the pace of recovery, noting that visibility and uncertainty persist in the current macro environment [26] Other Important Information - DXP completed six acquisitions in 2020, enhancing its market position and capabilities [28] - The company successfully refinanced its term loan B, providing additional financial flexibility [46] Q&A Session Summary Question: Insights on oil and gas market recovery - Management noted that while oil prices have improved, capital budgets are still cut back, leading to a slower recovery pace [51] Question: Future market exposure and M&A strategy - Management aims to reduce oil and gas exposure to about 20% while continuing to pursue acquisitions that enhance market diversity [53] Question: Current sales trends and cost expectations - Sales per business day showed slight fluctuations, with expectations for a significant uptick in March [57] - Q1 typically has higher SG&A costs due to various factors, but management is optimistic about maintaining gross margin trends [58]

Part I: Financial Information [Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) The company reported a significant net loss in Q3 and first nine months of 2020, driven by sales decline and a $48.4 million impairment charge, despite increased operating cash flow [Statements of Operations and Comprehensive Income](index=4&type=section&id=a)%20Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) DXP reported a net loss of **$34.8 million** in Q3 2020 and **$27.0 million** for the nine months, driven by a **32.7% sales decrease** and a **$48.4 million impairment charge** Q3 and Nine Months 2020 vs 2019 Performance (in thousands, except per share data) | Metric | Q3 2020 | Q3 2019 | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | :--- | :--- | | **Sales** | $220,193 | $327,178 | $772,577 | $971,721 | | **Gross Profit** | $61,301 | $92,704 | $214,982 | $268,891 | | **Impairment & Other Charges** | $48,401 | $0 | $48,401 | $0 | | **Income (Loss) from Operations** | ($40,846) | $21,717 | ($23,178) | $59,380 | | **Net Income (Loss)** | ($34,775) | $13,150 | ($27,047) | $33,687 | | **Diluted EPS** | ($1.95) | $0.71 | ($1.52) | $1.84 | [Balance Sheets](index=5&type=section&id=b)%20Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$736.7 million** as of Sep 30, 2020, primarily due to a **$27.7 million goodwill reduction**, while cash increased to **$97.3 million** Balance Sheet Comparison (in thousands) | Account | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Cash** | $97,287 | $54,203 | | **Goodwill** | $166,375 | $194,052 | | **Total Assets** | $736,718 | $788,220 | | **Total Liabilities** | $413,164 | $443,272 | | **Total Equity** | $323,554 | $344,948 | [Statements of Cash Flows](index=6&type=section&id=c)%20Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly increased to **$92.2 million** for the first nine months of 2020, driven by working capital management Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $92,240 | $7,485 | | **Net Cash used in Investing Activities** | ($20,525) | ($14,212) | | **Net Cash used in Financing Activities** | ($27,942) | ($5,444) | | **Net Change in Cash** | $43,052 | ($11,958) | [Notes to Financial Statements](index=7&type=section&id=e)%20Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the **$48.4 million impairment charge** due to COVID-19 and oil price collapse, segment performance, debt structure, and recent acquisitions, including increased ABL revolver capacity - The company performed an interim goodwill impairment test during Q3 2020 due to a significant decline in its market capitalization, driven by the collapse of oil prices and the COVID-19 pandemic[30](index=30&type=chunk) Impairment and Other Charges - Q3 2020 (in thousands) | Charge Type | Amount | | :--- | :--- | | Long-lived asset impairments | $4,775 | | Goodwill impairments | $36,435 | | Inventory and work-in-progress costs | $7,191 | | **Total** | **$48,401** | - Goodwill impairment of **$36.4 million** was recorded, with **$16.0 million** for the Innovative Pumping Solutions unit and **$20.5 million** for the Canadian reporting unit[31](index=31&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) - In March 2020, the company increased its asset-backed revolving line of credit (ABL Revolver) by **$50 million** to a total of **$135 million**. As of September 30, 2020, borrowing capacity was **$114.3 million**[59](index=59&type=chunk) - The company completed two acquisitions in early 2020: Pumping Systems, Inc. ("PSI") and Turbo Machinery Repair ("Turbo") for a total consideration of **$16.2 million** in cash and stock[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) [Management's Discussion and Analysis (MD&A)](index=18&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the **32.7% Q3 sales decline** to COVID-19 and oil price collapse, implementing cost cuts and enhancing liquidity, while generating strong operating cash flow despite net loss [Current Market Conditions and Outlook](index=19&type=section&id=Current%20Market%20Conditions%20and%20Outlook) The business faced significant impacts from COVID-19 and oil price declines, leading to capital spending cuts, with DXP implementing mitigation efforts and maintaining an essential business status - The COVID-19 outbreak drove a sharp erosion in demand for crude oil, and a failure by OPEC+ to agree on production cuts in March decimated oil prices, leading to severe capital spending budget cuts by customers[84](index=84&type=chunk) - Mitigation efforts include increasing the ABL revolver to **$135 million**, reducing discretionary expenditures, and suspending the company's matching contributions to retirement plans[85](index=85&type=chunk) - DXP has been exempted as an 'essential' business under various government orders, allowing warehouses and regional distribution centers to remain open with enhanced safety measures[86](index=86&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) Q3 2020 sales fell **32.7%** to **$220.2 million**, with Innovative Pumping Solutions down **73.4%**, leading to a **$40.8 million operating loss** due to sales decline and a **$48.4 million impairment charge** Sales by Business Segment - Q3 2020 vs Q3 2019 (in thousands) | Segment | Q3 2020 | Q3 2019 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Service Centers | $164,900 | $193,727 | ($28,827) | (14.9)% | | Innovative Pumping Solutions | $21,876 | $82,169 | ($60,293) | (73.4)% | | Supply Chain Services | $33,417 | $51,282 | ($17,865) | (34.8)% | | **Total DXP Sales** | **$220,193** | **$327,178** | **($106,985)** | **(32.7)%** | - The sales decrease in the Service Centers segment was primarily due to reduced demand for metal working, safety supply products, and bearings from customers in the OEM oil and gas markets[93](index=93&type=chunk) - Selling, General & Administrative (SG&A) expenses decreased by **$17.2 million (24.3%)** due to lower payroll, incentive compensation, and other cost reduction actions[100](index=100&type=chunk) - Operating income decreased by **$62.6 million** to a loss of **$40.8 million**, primarily due to the decline in sales and the **$48.4 million impairment charge**[104](index=104&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) As of Sep 30, 2020, the company maintained strong liquidity with **$97.4 million** cash and **$114.3 million** ABL facility availability, with operating cash flow reaching **$92.2 million** for the nine months - As of September 30, 2020, the company had cash and cash equivalents of **$97.4 million** and credit facility availability of **$114.3 million**[123](index=123&type=chunk) Net Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Operating Activities | $92,240 | $7,485 | | Investing Activities | ($20,525) | ($14,212) | | Financing Activities | ($27,942) | ($5,444) | - The **$84.8 million** year-over-year increase in cash from operations was primarily driven by collections of trade accounts receivables and decreased inventory purchases[127](index=127&type=chunk) - In May 2020, the company entered into an "at the market" equity distribution agreement to sell up to **$37.5 million** in common stock, raising net proceeds of approximately **$1.1 million** during the nine-month period[130](index=130&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=28&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's exposures to market risk have not materially changed since December 31, 2019 - The company's exposures to market risk have not changed materially since December 31, 2019[140](index=140&type=chunk) [Controls and Procedures](index=28&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2020, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of September 30, 2020, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[142](index=142&type=chunk) - There were no changes in internal control over financial reporting during the nine months ended September 30, 2020, that materially affected, or are reasonably likely to materially affect, internal controls[143](index=143&type=chunk) Part II: Other Information [Legal Proceedings](index=29&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is involved in various legal proceedings but believes their resolution will not materially adversely affect its financial position, cash flows, or operations - While unable to predict the outcome of various legal proceedings, DXP believes the ultimate resolution will not have a material adverse effect on its consolidated financial position, cash flows, or results of operations[147](index=147&type=chunk) [Risk Factors](index=29&type=section&id=ITEM%201A.%20Risk%20Factors) Key risks include business disruptions from the COVID-19 pandemic, a cyber-attack in August 2020, vulnerability to sustained low oil prices, and potential loss of key personnel - The COVID-19 pandemic has caused and could continue to cause supply chain disruptions, decreased customer demand, and lower oil prices, negatively impacting the business[150](index=150&type=chunk)[151](index=151&type=chunk) - The company's computer network was the target of a cyber-attack in August 2020. While the costs to remedy were not material, it highlights the vulnerability to such threats[149](index=149&type=chunk) - A significant portion of revenue depends on expenditures in the oil and gas industry; sustained low oil prices could continue to adversely affect revenues[157](index=157&type=chunk) - The unexpected loss of the executive management team or other key employees, with risk heightened by the COVID-19 pandemic, could adversely impact the company[153](index=153&type=chunk)[155](index=155&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q3 2020, the company repurchased common stock shares solely to satisfy tax withholding obligations for employee equity awards, not as part of a public program - In Q3 2020, the company withheld **1,202 shares** of common stock, at an average price of **$19.14**, to satisfy tax withholding obligations for employee equity awards[159](index=159&type=chunk) [Default upon Senior Securities](index=30&type=section&id=ITEM%203.%20Default%20upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - None[161](index=161&type=chunk) [Mine Safety Disclosures](index=30&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures for the period - None[162](index=162&type=chunk) [Other Information](index=30&type=section&id=ITEM%205.%20Other%20Information) The company reported no other information for the period - None[164](index=164&type=chunk) [Exhibits](index=31&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, CEO and CFO certifications, and financial data in iXBRL format - Exhibits filed include CEO and CFO certifications pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002[167](index=167&type=chunk)[168](index=168&type=chunk) - Financial statements and notes were submitted in Inline eXtensible Business Reporting Language (iXBRL) format[169](index=169&type=chunk)

Financial Data and Key Metrics Changes - Total sales for Q3 2020 were $220.2 million, down 12.4% from Q2 and down 32.7% compared to Q3 2019 [35][30] - Adjusted operating income for Q3 was $7.6 million, an increase of 74 basis points compared to Q2 2020 [44] - Adjusted EBITDA was $12.5 million in Q3, down from $28.2 million in Q3 2019, but improved 68 basis points sequentially [47] - Free cash flow generated during the quarter was $29.1 million, contributing to a total of $100 million expected for the year [50][26] Business Segment Data and Key Metrics Changes - Sales in the Innovative Pumping Solutions (IPS) segment were down 63.8% sequentially and 73.4% year-over-year, significantly impacted by capital budget cuts in the oil and gas industry [38][17] - Service Centers experienced a sequential sales growth of 7.2%, although down 14.9% from Q3 2019, driven by diverse end markets [37] - Supply Chain Services sales declined 9.9% sequentially and 34.8% year-over-year, reflecting reduced activity in oil and gas and transportation sectors [41] Market Data and Key Metrics Changes - Average daily sales for Q3 were $3.4 million, compared to $5.1 million in Q3 2019 and $4 million in Q2 2020 [36] - Key end markets driving performance included food and beverage, mining, municipal, and specialty chemicals [37] - The company aims to grow in markets such as food and beverage, sanitary, water and wastewater, chemicals, alternative energy, and military [16] Company Strategy and Development Direction - The company is focused on combining financial strength with local business agility to deliver superior value and growth opportunities [9] - DXP plans to continue its acquisition strategy, targeting non-oil and gas markets, specifically in water and wastewater and food and beverage sectors [27][54] - The company emphasizes a customer-focused approach, adapting to customer needs through digital transformation and an omni-channel strategy [20][19] Management's Comments on Operating Environment and Future Outlook - Management expressed pride in the team's ability to navigate challenges posed by COVID-19 and other external factors, while remaining focused on sales growth [7][28] - The company anticipates a gradual recovery in demand, particularly in the Supply Chain Services segment, with expectations for sequential growth in Q4 [23][41] - Management acknowledged the uncertainty in capital allocation decisions among customers due to the current environment, particularly in the IPS segment [40][63] Other Important Information - The company took a $48.4 million pretax charge related to impairment of goodwill and assets, which is a non-cash item [32] - Working capital was reduced to $161.7 million, reflecting improved collections and aligning with historical averages [48] - The company maintained a strong liquidity position with $228.6 million available, including cash and ABL availability [53] Q&A Session Summary - There were no questions during the Q&A session, indicating a lack of analyst participation [55]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [ ☒ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended June 30, 2020 or [ ☐ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission file number 0-21513 DXP Enterprises, Inc. (Exact name of registrant as specified in its charter) Texas 76-0509661 | --- | --- | |------ ...

Financial Data and Key Metrics Changes - For the six-month period ended June 30, 2020, total sales were $552.4 million and operating income was $17.7 million, with diluted earnings per share at $0.42 [25] - Total sales for Q2 were $251.4 million, a 16.5% decline sequentially and a 24.6% decline year-over-year [26] - Average daily sales for Q2 were $4.0 million per day, down from $5.3 million in Q2 2019 and $4.7 million in Q1 2020 [27] Business Line Data and Key Metrics Changes - Service Center sales were down 15.7% sequentially and 23.1% year-over-year [30] - Innovative Pumping Solutions (IPS) sales decreased 13.6% sequentially and 25.4% compared to Q2 of last year [30] - Supply Chain Services sales declined 23.3% sequentially and 29.1% year-over-year, reflecting significant pullback in oil and gas and transportation-related customers [31] Market Data and Key Metrics Changes - The U.S. and Canada average quarterly rig count is down 57% from Q1 to Q2, significantly affecting demand within the Safety Services division [14] - Downstream refinery business utilization rates dropped from an average of 88% in Q1 to 72% in Q2 [15] - Strength was noted in gold mining, specialty polymers, bottled water, and certain agricultural markets [16] Company Strategy and Development Direction - The company aims to drive sales growth and achieve excellence for stakeholders while navigating the challenges posed by COVID-19 [6][9] - DXP is focusing on maintaining a strong balance sheet to invest in capabilities through growth or acquisitions, with recent acquisitions in stable markets [19][20] - The company plans to continue pushing for resilience and adaptability in the second half of the year [22] Management's Comments on Operating Environment and Future Outlook - Management expressed that the recovery experienced in May and June was short-lived due to a resurgence in COVID-19 cases [11] - The company is adapting to operate safely in a COVID-19 environment while managing demand pressures [13] - Management remains optimistic about the long-term financial performance despite current challenges [6][21] Other Important Information - DXP achieved record cash flow in the quarter, driven by improved collections, resulting in a significant improvement in liquidity and a reduction in total debt [40][41] - The company has no near-term maturities, with a strong capital structure designed for flexibility [44] - The average backlog for Q2 is 6% below fiscal year 2015 but 60% above fiscal year 2016 [18] Q&A Session Summary Question: Can you provide insights on monthly sales per day? - Monthly sales per day decreased from $5.2 million in March to $3.2 million in July, indicating a year-over-year decline of 25% to 35% [48][49] Question: What are the trends in Service Center and IPS segments? - Service Center bookings have shown an uptick in July, while IPS backlog is trending down but remains profitable [51][52] Question: How much temporary cost reduction occurred in Q2? - The company has taken out over $28 million in costs from 2019 levels, with ongoing cost management strategies in place [63] Question: What is the outlook for the Supply Chain segment? - The Supply Chain segment faced significant declines due to customer facility closures, but profitability was maintained as expenses also decreased [68] Question: What are the plans for inventory management? - Adjustments to inventory levels were made in April, with expectations for inventory to decrease in the second half of the year [75] Question: What is the company's approach to M&A? - The company is looking to close 1 or 2 acquisitions by year-end, focusing on businesses that have shown growth during the pandemic [76][79]

PART I: FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and related notes, along with management's discussion and analysis of financial condition and results of operations [ITEM 1. Financial Statements](index=3&type=section&id=ITEM%201.%20Financial%20Statements) This section provides the unaudited condensed consolidated financial statements, including statements of operations, balance sheets, cash flows, and equity, along with detailed notes [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income](index=3&type=section&id=a)%20Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) The condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2020, show a decrease in sales and net income compared to the prior year, alongside a decline in earnings per share | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | Change (%) | | :----------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :--------- | | Sales | $300,983 | $311,225 | -3.3% | | Gross Profit | $83,985 | $84,200 | -0.3% | | Income from Operations | $10,915 | $14,816 | -26.3% | | Net Income | $5,648 | $7,187 | -21.4% | | Net Income Attributable to DXP Enterprises, Inc. | $5,710 | $7,291 | -21.7% | | Basic EPS | $0.32 | $0.41 | -22.0% | | Diluted EPS | $0.31 | $0.40 | -22.5% | [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=b)%20Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets as of March 31, 2020, indicate a slight increase in total assets and equity compared to December 31, 2019, while total liabilities saw a minor decrease | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | Change (%) | | :----------------------------------- | :------------------------------ | :------------------------------- | :--------- | | Total Current Assets | $403,308 | $408,481 | -1.3% | | Total Assets | $791,691 | $788,220 | 0.4% | | Total Current Liabilities | $144,552 | $148,171 | -2.5% | | Total Liabilities | $439,471 | $443,272 | -0.9% | | Total Equity | $352,220 | $344,948 | 2.1% | [Unaudited Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=c)%20Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The condensed consolidated statements of cash flows for the three months ended March 31, 2020, show a significant increase in cash used for investing activities, primarily due to business acquisitions, while cash used in operating and financing activities decreased | Cash Flow Activity | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | Change (YoY) | | :----------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :----------- | | Net cash used in operating activities | $(1,612) | $(5,310) | $(3,698) (69.6% decrease in usage) | | Net cash used in investing activities | $(17,388) | $(2,283) | $(15,105) (661.6% increase in usage) | | Net cash used in financing activities | $(742) | $(2,310) | $(1,568) (67.9% decrease in usage) | | Net change in cash and restricted cash | $(21,472) | $(9,791) | $(11,681) (119.3% increase in usage) | [Unaudited Condensed Consolidated Statements of Equity](index=7&type=section&id=d)%20Unaudited%20Condensed%20Consolidated%20Statements%20of%20Equity) The condensed consolidated statements of equity detail changes in shareholders' equity for the three months ended March 31, 2020, reflecting net income, stock compensation, and the impact of currency translation adjustments | Equity Component | Balance at Dec 31, 2019 (in thousands) | Q1 2020 Activity (in thousands) | Balance at Mar 31, 2020 (in thousands) | | :----------------------------------- | :------------------------------------- | :------------------------------ | :------------------------------------- | | Common Stock | $174 | $1 | $175 | | Additional Paid-in Capital | $157,886 | $2,909 | $160,695 | | Retained Earnings | $205,680 | $5,687 | $211,367 | | Accumulated Other Comprehensive Loss | $(19,954) | $(1,163) | $(21,117) | | Total DXP Enterprises, Inc. Equity | $343,802 | $7,334 | $351,136 | | Noncontrolling Interest | $1,146 | $(62) | $1,084 | | Total Equity | $344,948 | $7,272 | $352,220 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=e)%20Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes explaining the accounting policies, recent pronouncements, and specific financial statement line items [NOTE 1 - THE COMPANY](index=8&type=section&id=NOTE%201%20-%20THE%20COMPANY) DXP Enterprises, Inc. distributes maintenance, repair, and operating (MRO) products and services to energy and industrial customers, also providing custom pump solutions and manufacturing - DXP's core business involves distributing **maintenance, repair, and operating (MRO) products and services** to energy and industrial customers[23](index=23&type=chunk) - The company also provides integrated, custom pump skid packages, pump remanufacturing, and manufactures branded private label pumps[23](index=23&type=chunk) - DXP is organized into **three business segments**: Service Centers (SC), Supply Chain Services (SCS), and Innovative Pumping Solutions (IPS)[23](index=23&type=chunk) [NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES](index=8&type=section&id=NOTE%202%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20AND%20BUSINESS%20POLICIES) The financial statements are prepared in accordance with US GAAP, presenting condensed consolidated results that include the Company, its wholly-owned subsidiaries, and a variable interest entity, with all inter-company transactions eliminated - The Company's financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP")[24](index=24&type=chunk) - The condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and its variable interest entity ("VIE")[24](index=24&type=chunk) - All inter-company accounts and transactions have been eliminated upon consolidation[25](index=25&type=chunk) [NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS](index=8&type=section&id=NOTE%203%20-%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) The company adopted new accounting standards for internal-use software, fair value measurement, and credit losses effective January 1, 2020, with immaterial impacts on financial results, and is currently evaluating the potential impact of ASU 2020-04 on reference rate reform - Adopted ASU No. 2018-15 (Internal-Use Software) effective **January 1, 2020**, with **no impact** on results of operations[26](index=26&type=chunk) - Adopted ASU 2018-13 (Fair Value Measurement) effective **January 1, 2020**, with **no impact** on results of operations[27](index=27&type=chunk) - Adopted ASU 2016-13 (Measurement of Credit Losses) effective **January 1, 2020**, resulting in an **immaterial impact** to beginning retained earnings but requiring changes to the process of estimating expected credit losses[29](index=29&type=chunk) - Currently evaluating the potential impact of ASU 2020-04 (Reference Rate Reform) issued in March 2020[30](index=30&type=chunk) [NOTE 4 - LEASES](index=9&type=section&id=NOTE%204%20-%20LEASES) Supplemental information on leases shows cash payments for operating leases and the values of operating lease right-of-use assets and liabilities, indicating a slight decrease in total operating lease liabilities year-over-year | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :----------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Operating cash flows from operating leases | $4,672 | $4,513 | | Right-of-use assets obtained from operating leases | $4,326 | $2,935 | | Metric | March 31, 2020 (in thousands) | March 31, 2019 (in thousands) | | :----------------------------------- | :------------------------------ | :------------------------------ | | Operating lease right-of-use assets | $65,268 | $70,851 | | Short-term operating lease liabilities | $15,926 | $17,660 | | Long-term operating lease liabilities | $47,480 | $52,993 | | Total operating lease liabilities | $63,406 | $70,653 | - During the three months ended March 31, 2020, the Company paid **$2.4 million** in current and future lease obligations to entities invested in by the Company's Chief Executive Officer[35](index=35&type=chunk) [NOTE 5 - FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES](index=10&type=section&id=NOTE%205%20-%20FAIR%20VALUE%20OF%20FINANCIAL%20ASSETS%20AND%20LIABILITIES) This note outlines the fair value hierarchy (Level 1, 2, 3) for financial assets and liabilities, specifically detailing the Level 3 contingent consideration liability of $2.2 million related to the ASI acquisition, which is valued using discounted cash flow based on unobservable inputs - Contingent consideration liability associated with the acquisition of Application Specialties Inc. ("ASI") was recorded at **$2.2 million** as of March 31, 2020, classified as **Level 3 fair value measurement**[40](index=40&type=chunk)[43](index=43&type=chunk) - The fair value measurement for contingent consideration uses discounted cash flow, with significant unobservable inputs including annualized EBITDA forecasts and probability of achievement[43](index=43&type=chunk) | Metric | Amount (in thousands) | | :----------------------------------- | :-------------------- | | Beginning balance at December 31, 2019 | $2,705 | | Changes in fair value recorded in other (income) expense, net | $(496) | | Ending Balance at March 31, 2020 | $2,208 | [NOTE 6 – INVENTORIES](index=11&type=section&id=NOTE%206%20%E2%80%93%20INVENTORIES) The carrying values of inventories increased slightly from December 31, 2019, to March 31, 2020, primarily driven by an increase in finished goods, partially offset by a minor increase in the obsolescence reserve | Inventory Component | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :----------------------------------- | :------------------------------ | :------------------------------- | | Finished goods | $127,219 | $122,510 | | Work in process | $18,703 | $19,721 | | Obsolescence reserve | $(12,901) | $(12,867) | | Total Inventories | $133,021 | $129,364 | [NOTE 7 – COSTS AND ESTIMATED PROFITS ON UNCOMPLETED CONTRACTS](index=12&type=section&id=NOTE%207%20%E2%80%93%20COSTS%20AND%20ESTIMATED%20PROFITS%20ON%20UNCOMPLETED%20CONTRACTS) This note details the accounting for contract assets and liabilities related to customized pump production, showing an increase in net contract assets from December 31, 2019, to March 31, 2020, primarily due to timing differences between performance and customer payments | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :----------------------------------- | :------------------------------ | :------------------------------- | | Costs incurred on uncompleted contracts | $58,607 | $51,017 | | Estimated profits, thereon | $11,409 | $10,771 | | Total | $70,016 | $61,788 | | Less: billings to date | $38,753 | $41,223 | | Net | $31,263 | $20,565 | - Contract assets are presented as "Cost and estimated profits in excess of billings," while contract liabilities are "Billings in excess of costs and estimated profits"[47](index=47&type=chunk) - During Q1 2020, **$8.5 million** of contract liabilities from the beginning of the period shipped, with overall changes primarily due to normal activity and timing differences[48](index=48&type=chunk) [NOTE 8 – INCOME TAXES](index=12&type=section&id=NOTE%208%20%E2%80%93%20INCOME%20TAXES) The effective tax rate for the three months ended March 31, 2020, decreased to 23.3% from 26.7% in the prior year, influenced by state and foreign taxes, nondeductible expenses, and research and development tax credits | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Effective tax rate from continuing operations | 23.3% | 26.7% | - The effective tax rate was increased by state taxes, foreign taxes, and nondeductible expenses, and partially offset by research and development tax credits and other tax credits[49](index=49&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk) [NOTE 9 – LONG-TERM DEBT](index=13&type=section&id=NOTE%209%20%E2%80%93%20LONG-TERM%20DEBT) The company's long-term debt primarily consists of Term Loan B, with a carrying value of $243.8 million as of March 31, 2020. The ABL Revolver facility was increased to $135 million in March 2020, providing $131.6 million in borrowing capacity with no outstanding balance | Debt Component | Carrying Value (Mar 31, 2020, in thousands) | Fair Value (Mar 31, 2020, in thousands) | | :----------------------------------- | :------------------------------------------ | :-------------------------------------- | | Term Loan B | $243,750 | $209,625 | | Total long-term debt | $243,750 | $209,625 | | Less: current portion | $(2,500) | $(2,150) | | Long-term debt less current maturities | $241,250 | $207,475 | - On March 17, 2020, the ABL Revolver facility was increased by **$50.0 million** to **$135 million**[53](index=53&type=chunk) - As of March 31, 2020, the Company had **no amount outstanding** under the ABL Revolver and had **$131.6 million** of borrowing capacity[53](index=53&type=chunk) [NOTE 10 - EARNINGS PER SHARE DATA](index=14&type=section&id=NOTE%2010%20-%20EARNINGS%20PER%20SHARE%20DATA) Basic and diluted earnings per share both decreased for the three months ended March 31, 2020, compared to the prior year, reflecting lower net income attributable to common shareholders | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Basic Earnings Per Share | $0.32 | $0.41 | | Diluted Earnings Per Share | $0.31 | $0.40 | | Weighted Average Common Shares Outstanding (Basic) | 17,713 | 17,566 | | Weighted Average Common Shares Outstanding (Diluted) | 18,553 | 18,406 | [NOTE 11 - COMMITMENTS AND CONTINGENCIES](index=14&type=section&id=NOTE%2011%20-%20COMMITMENTS%20AND%20CONTINGENCIES) The company is involved in various legal proceedings in the ordinary course of business, but management believes their ultimate resolution will not have a material adverse effect on DXP's consolidated financial position, cash flows, or results of operations - DXP is a party to various legal proceedings arising in the ordinary course of business[57](index=57&type=chunk) - Management believes the ultimate resolution of these lawsuits will **not have a material adverse effect** on DXP's consolidated financial position, cash flows, or results of operations[57](index=57&type=chunk) [NOTE 12 - SEGMENT REPORTING](index=14&type=section&id=NOTE%2012%20-%20SEGMENT%20REPORTING) This note provides financial information for DXP's three reportable segments: Service Centers, Innovative Pumping Solutions, and Supply Chain Services, detailing revenue and operating income, and their reconciliation to consolidated income before taxes | Segment | Total Revenue (Q1 2020, in thousands) | Total Revenue (Q1 2019, in thousands) | Change (%) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :--------- | | Service Centers (SC) | $182,585 | $186,179 | -1.9% | | Innovative Pumping Solutions (IPS) | $70,021 | $74,723 | -6.3% | | Supply Chain Services (SCS) | $48,377 | $50,323 | -3.9% | | **Total Revenue** | **$300,983** | **$311,225** | **-3.3%** | | Segment | Income from Operations (Q1 2020, in thousands) | Income from Operations (Q1 2019, in thousands) | Change (%) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | | Service Centers (SC) | $16,926 | $18,980 | -10.8% | | Innovative Pumping Solutions (IPS) | $10,428 | $6,799 | 53.4% | | Supply Chain Services (SCS) | $3,755 | $4,086 | -8.1% | | **Operating income for reportable segments** | **$31,109** | **$29,865** | **4.2%** | - Reconciliation to consolidated income before taxes includes adjustments for amortization of intangible assets (**$3.2 million** in Q1 2020) and corporate expenses (**$17.0 million** in Q1 2020)[63](index=63&type=chunk) [NOTE 13 - BUSINESS ACQUISITIONS](index=16&type=section&id=NOTE%2013%20-%20BUSINESS%20ACQUISITIONS) In the first quarter of 2020, DXP completed two acquisitions: Turbo Machinery Repair for $3.2 million in cash and Pumping Systems, Inc. (PSI) for $13.0 million in cash and stock, contributing a combined $5.2 million in sales - Acquired Turbo Machinery Repair on February 1, 2020, for approximately **$3.2 million in cash**, contributing **$0.5 million in sales** for Q1 2020[65](index=65&type=chunk) - Acquired substantially all assets of Pumping Systems, Inc. (PSI) on January 1, 2020, for approximately **$13.0 million in cash and stock**, contributing **$4.7 million in sales** for Q1 2020[66](index=66&type=chunk) | Purchase Price Consideration | Amount (in millions) | | :----------------------------------- | :------------------- | | Cash payments | $14.2 | | Fair value of stock issued | $2.0 | | Total purchase price consideration | $16.2 | [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis provides insights into DXP's financial performance and condition for the three months ended March 31, 2020, highlighting the significant impact of the COVID-19 pandemic and low oil prices on market conditions, segment results, and liquidity, along with the company's mitigation strategies [DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS](index=17&type=section&id=DISCLOSURE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section warns that the report contains forward-looking statements about DXP's future performance, profitability, cash flow, liquidity, and growth, which are subject to significant risks and uncertainties, including the impact of COVID-19 and low commodity prices - The report contains forward-looking statements regarding the Company's expectations for business, future profitability, cash flow, liquidity, and growth[70](index=70&type=chunk) - These statements are subject to **significant risks and uncertainties**, including the impact of the COVID-19 pandemic and low commodity prices of oil and gas[70](index=70&type=chunk) - The Company assumes **no obligation** and does not intend to update these forward-looking statements[70](index=70&type=chunk) [CURRENT MARKET CONDITIONS AND OUTLOOK](index=17&type=section&id=CURRENT%20MARKET%20CONDITIONS%20AND%20OUTLOOK) The first quarter of 2020 saw severe market disruption due to COVID-19 and low oil prices, leading to demand destruction and industry-wide spending cuts. DXP responded by increasing its ABL revolver, reducing discretionary spending, and maintaining operations as an essential business, while anticipating continued declines in activity - The COVID-19 pandemic and failure of OPEC+ to agree on production cuts led to sharp demand destruction for crude oil and **decimated oil prices** in Q1 2020[71](index=71&type=chunk) - North American rig count declined from over **1,200 in March 2019** to **435 as of May 1, 2020**[71](index=71&type=chunk) - DXP's mitigation efforts include increasing its ABL revolver facility to **$135 million**, reducing discretionary expenditures, suspending retirement plan matching contributions, and operating as an "essential" business with employee safety measures[72](index=72&type=chunk)[73](index=73&type=chunk) - Management expects industry activity and customer spending to **decrease throughout the remainder of 2020**, potentially impacting results and asset carrying values[76](index=76&type=chunk) [RESULTS OF OPERATIONS](index=19&type=section&id=RESULTS%20OF%20OPERATIONS) DXP's Q1 2020 results show a 3.3% decrease in total sales to $301.0 million, primarily driven by declines across all segments due to reduced capital spending and COVID-19 impacts. Gross profit percentage improved, but increased SG&A expenses led to a 26.3% decrease in operating income [Sales Analysis](index=19&type=section&id=Sales%20Analysis) Total sales for Q1 2020 decreased by 3.3% to $301.0 million, with $5.2 million contributed by acquisitions. All three business segments experienced sales declines, primarily due to decreased capital spending in oil and gas and the economic impacts of COVID-19 | Segment | Sales (Q1 2020, in thousands) | Sales (Q1 2019, in thousands) | Change (in thousands) | Change (%) | | :----------------------------------- | :---------------------------- | :---------------------------- | :-------------------- | :--------- | | Service Centers | $182,585 | $186,179 | $(3,594) | -1.9% | | Innovative Pumping Solutions | $70,021 | $74,723 | $(4,702) | -6.3% | | Supply Chain Services | $48,377 | $50,323 | $(1,946) | -3.9% | | **Total DXP Sales** | **$300,983** | **$311,225** | **$(10,242)** | **-3.3%** | - Sales from businesses acquired during Q1 2020 accounted for **$5.2 million** of total sales[79](index=79&type=chunk) [Gross Profit Analysis](index=20&type=section&id=Gross%20Profit%20Analysis) Gross profit as a percentage of sales increased by 85 basis points to 27.9% in Q1 2020, primarily driven by a significant increase in the IPS segment's gross profit percentage due to improved utilization and pricing, partially offset by a decrease in the SC segment | Metric | Q1 2020 | Q1 2019 | Change (basis points) | | :----------------------------------- | :------ | :------ | :-------------------- | | Gross profit as a percentage of sales | 27.9% | 27.1% | 85 bps | | IPS segment gross profit percentage change | +435 bps | N/A | N/A | | SC segment gross profit percentage change (adjusted) | -27 bps | N/A | N/A | | SCS segment gross profit percentage change | +15 bps | N/A | N/A | - The increase in IPS gross profit percentage was primarily due to increased utilization and capacity within its engineered-to-order business and an overall improvement in the pricing environment[86](index=86&type=chunk) [Selling, General and Administrative Expenses](index=20&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses) Selling, general and administrative (SG&A) expenses increased by $3.7 million (5.3%) to $73.1 million in Q1 2020, with $1.5 million attributed to acquired businesses. The increase was driven by higher payroll, incentive compensation, and 401(k) expenses, leading to a 192 basis point increase as a percentage of sales (adjusted for acquisitions) | Metric | Q1 2020 (in thousands) | Q1 2019 (in thousands) | Change (in thousands) | Change (%) | | :----------------------------------- | :--------------------- | :--------------------- | :-------------------- | :--------- | | SG&A Expense | $73,070 | $69,384 | $3,686 | 5.3% | | SG&A as % of Sales | 24.3% | 22.3% | 200 bps | | SG&A as % of Sales (adjusted for acquisitions) | 24.2% | 22.3% | 192 bps | - The increase in SG&A was primarily due to increased payroll, incentive compensation, and related taxes and 401(k) expenses[89](index=89&type=chunk) [Operating Income](index=20&type=section&id=Operating%20Income) Operating income for Q1 2020 decreased by $3.9 million (26.3%) to $10.9 million, primarily due to the increase in selling, general, and administrative expenses | Metric | Q1 2020 (in thousands) | Q1 2019 (in thousands) | Change (in thousands) | Change (%) | | :----------------------------------- | :--------------------- | :--------------------- | :-------------------- | :--------- | | Operating Income | $10,915 | $14,816 | $(3,901) | -26.3% | [INTEREST EXPENSE](index=21&type=section&id=INTEREST%20EXPENSE) Interest expense for the first quarter of 2020 decreased by $0.7 million compared to the prior year, primarily due to lower LIBOR rates | Metric | Q1 2020 (in thousands) | Q1 2019 (in thousands) | Change (in thousands) | | :----------------------------------- | :--------------------- | :--------------------- | :-------------------- | | Interest Expense | $4,377 | $5,040 | $(663) | - The decrease in interest expense was primarily due to **lower LIBOR rates**[92](index=92&type=chunk) [INCOME TAXES](index=21&type=section&id=INCOME%20TAXES) The effective tax rate from continuing operations decreased to 23.3% in Q1 2020 from 26.7% in Q1 2019, influenced by state and foreign taxes, nondeductible expenses, and various tax credits | Metric | Q1 2020 | Q1 2019 | | :----------------------------------- | :------ | :------ | | Effective tax rate from continuing operations | 23.3% | 26.7% | - The effective tax rate was increased by state taxes, foreign taxes, and nondeductible expenses, and decreased by research and development tax credits and other tax credits[93](index=93&type=chunk)[94](index=94&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=21&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) As of March 31, 2020, DXP had $32.9 million in cash and $237.8 million in borrowings. The ABL Revolver facility was increased to $135 million, providing $131.6 million in available borrowing capacity. The company believes its cash flow from operations and credit facilities are adequate for working capital needs, but may seek additional financing for future acquisitions - As of March 31, 2020, DXP had cash and cash equivalents of **$32.9 million** and bank and other borrowings of **$237.8 million**[95](index=95&type=chunk) - The ABL Revolver facility was increased to **$135 million** on March 17, 2020, with **$131.6 million** of borrowing capacity available as of March 31, 2020 (no outstanding balance)[103](index=103&type=chunk) | Cash Flow Activity | Q1 2020 (in thousands) | Q1 2019 (in thousands) | | :----------------------------------- | :--------------------- | :--------------------- | | Net Cash Used in Operating Activities | $(1,612) | $(5,310) | | Net Cash Used in Investing Activities | $(17,388) | $(2,283) | | Net Cash Used in Financing Activities | $(742) | $(2,310) | - Net cash used in investing activities increased by **$15.2 million** in Q1 2020, primarily driven by the acquisitions of PSI and Turbo[100](index=100&type=chunk) - The Company believes its cash generated from operations will meet normal working capital needs for the next twelve months, but may require additional debt or equity financing for potential acquisitions[106](index=106&type=chunk) [DISCUSSION OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES](index=22&type=section&id=DISCUSSION%20OF%20SIGNIFICANT%20ACCOUNTING%20AND%20BUSINESS%20POLICIES) This section reiterates that the condensed financial statements are prepared in accordance with US GAAP and should be read in conjunction with the annual report on Form 10-K for a comprehensive understanding of significant accounting policies and business practices - The Company's condensed financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP")[108](index=108&type=chunk) - These statements should be read in conjunction with the annual report on Form 10-K for a more complete discussion of significant accounting policies and business practices[108](index=108&type=chunk) [RECENT ACCOUNTING PRONOUNCEMENTS](index=22&type=section&id=RECENT%20ACCOUNTING%20PRONOUNCEMENTS) This section refers readers to Note 3 of the Condensed Consolidated Financial Statements for detailed information regarding recent accounting pronouncements - Refer to Note 3 - Recent Accounting Pronouncements to the Condensed Consolidated Financial Statements for information regarding recent accounting pronouncements[109](index=109&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=22&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company states that its exposures to market risk have not materially changed since December 31, 2019, and directs readers to its Annual Report on Form 10-K for comprehensive disclosures on this topic - The Company's exposures to market risk have **not changed materially** since December 31, 2019[110](index=110&type=chunk) - For detailed quantitative and qualitative disclosures about market risk, refer to Item 7A of the Annual Report on Form 10-K for the year ended December 31, 2019[110](index=110&type=chunk) [ITEM 4. Controls and Procedures](index=23&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management, with the participation of the CEO and CFO, concluded that DXP's disclosure controls and procedures were effective as of March 31, 2020. No material changes in internal control over financial reporting occurred during the quarter, though inherent limitations of internal controls are acknowledged - Disclosure controls and procedures were evaluated and deemed **effective** as of March 31, 2020[112](index=112&type=chunk) - **No material changes** in internal control over financial reporting occurred during the three months ended March 31, 2020[113](index=113&type=chunk) - Internal control over financial reporting has inherent limitations and cannot provide absolute assurance of achieving financial reporting objectives[114](index=114&type=chunk) PART II: OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other disclosures not included in the financial statements [ITEM 1. Legal Proceedings](index=24&type=section&id=ITEM%201.%20Legal%20Proceedings) DXP is routinely involved in various legal proceedings arising in the ordinary course of business, but the company believes that the ultimate resolution of these matters will not have a material adverse effect on its financial position, cash flows, or results of operations - The Company is a party to various legal proceedings arising in the ordinary course of business[117](index=117&type=chunk) - DXP believes the ultimate resolution of these lawsuits will **not have a material adverse effect** on its consolidated financial position, cash flows, or results of operations[117](index=117&type=chunk) [ITEM 1A. Risk Factors](index=24&type=section&id=ITEM%201A.%20Risk%20Factors) Key risk factors include the widespread disruptions caused by the COVID-19 pandemic, which could lead to supply chain issues, decreased customer demand, and lower oil prices. Additionally, the unexpected loss of key management or widespread employee illness, and sustained low oil prices, pose significant threats to DXP's business and financial performance - The COVID-19 pandemic could result in disruptions in the supply chain, decreased customer demand, lower oil prices, and volatility in the stock market and global economy, **negatively impacting DXP's business**[118](index=118&type=chunk)[119](index=119&type=chunk) - The unexpected loss of services from the executive management team or other key employees, particularly due to COVID-19, could **adversely impact business and operations**[121](index=121&type=chunk)[122](index=122&type=chunk) - Sustained low oil prices or a continued decline could lead to decreased capital and operating expenditures in the oil and natural gas industry, **adversely affecting DXP's revenues**[123](index=123&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=25&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the first quarter of 2020, DXP issued 49,468 shares of common stock for $2.0 million in a private placement to certain employees of Pumping Systems, Inc. (PSI), as part of the PSI acquisition - Issued an aggregate of **49,468 shares of common stock** to certain employees of PSI in a private placement[125](index=125&type=chunk) - The total consideration for these shares was **$2.0 million**[125](index=125&type=chunk) - This issuance was part of the acquisition of Pumping Systems, Inc. (PSI)[125](index=125&type=chunk) [ITEM 3. Default upon Senior Securities](index=25&type=section&id=ITEM%203.%20Default%20upon%20Senior%20Securities) The company reported no defaults upon senior securities during the fiscal quarter ended March 31, 2020 - There were **no defaults** upon senior securities during the fiscal quarter ended March 31, 2020[127](index=127&type=chunk) [ITEM 4. Mine Safety Disclosures](index=25&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures for the period - **No mine safety disclosures** were reported[128](index=128&type=chunk) [ITEM 5. Other Information](index=25&type=section&id=ITEM%205.%20Other%20Information) The company reported no other information for the period - **No other information** was reported[130](index=130&type=chunk) [ITEM 6. Exhibits](index=26&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate organizational documents, the Increase Agreement for the ABL Revolver, and certifications from the Chief Executive Officer and Chief Financial Officer - Exhibits include Restated Articles of Incorporation, Bylaws, and the Increase Agreement dated March 17, 2020, related to the ABL Revolver[132](index=132&type=chunk)[133](index=133&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer are included pursuant to Rule 13a-14(a) and 18 U.S.C. 1350[134](index=134&type=chunk)[135](index=135&type=chunk) - Interactive Data Files (101) are also filed as exhibits[136](index=136&type=chunk) [Signatures](index=27&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q, confirming its due authorization and filing by DXP Enterprises, Inc. on May 8, 2020 - The report was signed on behalf of DXP ENTERPRISES, INC. by **Kent Yee, Senior Vice President and Chief Financial Officer**[139](index=139&type=chunk) - The report was dated **May 8, 2020**[139](index=139&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended December 31, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission file number 0-21513 DXP Enterprises, Inc. (Exact name of registrant as specified in its charter) Texas 76-0509661 | --- | --- | --- | |------------ ...