DXP Enterprises(DXPE) - 2020 Q1 - Quarterly Report

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 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%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%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%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%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%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 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] - The company also provides integrated, custom pump skid packages, pump remanufacturing, and manufactures branded private label pumps[23] - DXP is organized into three business segments: Service Centers (SC), Supply Chain Services (SCS), and Innovative Pumping Solutions (IPS)[23] NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES 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] - The condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and its variable interest entity ("VIE")[24] - All inter-company accounts and transactions have been eliminated upon consolidation[25] NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS 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] - Adopted ASU 2018-13 (Fair Value Measurement) effective January 1, 2020, with no impact on results of operations[27] - 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] - Currently evaluating the potential impact of ASU 2020-04 (Reference Rate Reform) issued in March 2020[30] NOTE 4 - LEASES 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] NOTE 5 - FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES 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][43] - The fair value measurement for contingent consideration uses discounted cash flow, with significant unobservable inputs including annualized EBITDA forecasts and probability of achievement[43] | 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 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 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] - 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] NOTE 8 – INCOME TAXES 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][93][94] NOTE 9 – LONG-TERM DEBT 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] - As of March 31, 2020, the Company had no amount outstanding under the ABL Revolver and had $131.6 million of borrowing capacity[53] NOTE 10 - EARNINGS PER SHARE DATA 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 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] - 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] NOTE 12 - SEGMENT REPORTING 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] NOTE 13 - BUSINESS ACQUISITIONS 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] - 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] | 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 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 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] - 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] - The Company assumes no obligation and does not intend to update these forward-looking statements[70] CURRENT MARKET CONDITIONS AND OUTLOOK 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] - North American rig count declined from over 1,200 in March 2019 to 435 as of May 1, 2020[71] - 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][73] - Management expects industry activity and customer spending to decrease throughout the remainder of 2020, potentially impacting results and asset carrying values[76] RESULTS OF OPERATIONS 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 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] Gross Profit Analysis 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] Selling, General and Administrative Expenses 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] Operating Income 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 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] INCOME TAXES 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][94] LIQUIDITY AND CAPITAL RESOURCES 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] - 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] | 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] - 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] DISCUSSION OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES 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] - 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] RECENT ACCOUNTING PRONOUNCEMENTS 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] ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 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] - 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] ITEM 4. Controls and Procedures 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] - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2020[113] - Internal control over financial reporting has inherent limitations and cannot provide absolute assurance of achieving financial reporting objectives[114] 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 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] - 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] ITEM 1A. Risk Factors 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][119] - 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][122] - 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] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] - The total consideration for these shares was $2.0 million[125] - This issuance was part of the acquisition of Pumping Systems, Inc. (PSI)[125] ITEM 3. Default upon Senior Securities 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] ITEM 4. Mine Safety Disclosures The company reported no mine safety disclosures for the period - No mine safety disclosures were reported[128] ITEM 5. Other Information The company reported no other information for the period - No other information was reported[130] ITEM 6. Exhibits 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][133] - 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][135] - Interactive Data Files (101) are also filed as exhibits[136] 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] - The report was dated May 8, 2020[139]