DXP ENTERPRISES INC 10-Q/A

ITEM 1: FINANCIAL STATEMENTS DXP ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (in thousands, except per share amounts) (unaudited) Three Months Ended March 31, 2021 2020 (Restated) (Restated) Sales $ 245,587 $ 300,983 Cost of sales 173,957 217,869 Gross profit 71,630 83,114 Selling, general and administrative expenses 65,397 71,795 Income from operations 6,233 11,319 Other income ( 430 ) ( 834 ) Interest expense 5,243 4,377 Income before income taxes 1,420 7,776 Provision for income taxes 1,261 1,786 Net income 159 5,990 Net loss attributable to noncontrolling interest ( 212 ) ( 62 ) Net income attributable to DXP Enterprises, Inc. 371 6,052 Preferred stock dividend 23 23 Net income attributable to common shareholders $ 348 $ 6,029 Net income $ 159 $ 5,990 Currency translation adjustments 1,277 ( 1,163 ) Comprehensive income $ 1,436 $ 4,827 Earnings per share (Note 10) : Basic $ 0.02 $ 0.34 Diluted $ 0.02 $ 0.32 Weighted average common shares outstanding : Basic 19,186 17,713 Diluted 20,026 18,553 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 DXP ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) (unaudited) March 31, 2021 December 31, 2020 (Restated) (Restated) ASSETS Current assets: Cash $ 127,361 $ 119,328 Restricted cash 91 91 Accounts Receivable, net of allowance of $ 8,441 and $ 8,628 169,632 166,941 Inventories 103,407 97,071 Costs and estimated profits in excess of billings 14,415 18,459 Prepaid expenses and other current assets 7,534 4,548 Federal income taxes receivable 3,234 2,987 Total current assets 425,674 409,425 Property and equipment, net 54,110 56,899 Goodwill 261,927 261,767 Other intangible assets, net 76,008 80,088 Operating lease ROU assets 59,949 55,188 Other long-term assets 4,332 4,764 Total assets $ 882,000 $ 868,131 LIABILITIES AND EQUITY Current liabilities: Current maturities of long-term debt $ 3,300 $ 3,300 Trade accounts payable 70,650 64,849 Accrued wages and benefits 19,179 20,621 Customer advances 3,967 3,688 Billings in excess of costs and estimated profits 5,950 4,061 Short-term operating lease liabilities 17,590 15,891 Other current liabilities 35,645 34,729 Total current liabilities 156,281 147,139 Long-term debt, net of unamortized debt issuance costs 316,741 317,139 Long-term operating lease liabilities 41,267 38,010 Other long-term liabilities 2,930 2,930 Deferred income taxes 2,369 1,777 Total long-term liabilities 363,307 359,856 Total liabilities 519,588 506,995 Commitments and contingencies ( Note 11 ) Shareholders' Equity: Series A and B preferred stock, $ 1.00 par value each; 1,000,000 shares authorized each 16 16 Common stock, $ 0.01 par value, 100,000,000 shares authorized; 19,200,923 and 19,208,067 outstanding 189 189 Additional paid-in capital 191,931 192,068 Retained earnings 186,426 186,078 Accumulated other comprehensive loss ( 16,736 ) ( 18,013 ) Total DXP Enterprises, Inc. Equity 361,826 360,338 Noncontrolling interest 586 798 Total Equity 362,412 361,136 Total liabilities and Equity $ 882,000 $ 868,131 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 DXP ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Three Months Ended March 31, 2021 2020 (Restated) (Restated) CASH FLOWS FROM OPERATING ACTIVITIES: Net income attributable to DXP Enterprises, Inc. $ 371 $ 6,052 Less: net loss attributable to non-controlling interest ( 212 ) ( 62 ) Net income 159 5,990 Reconciliation of net income to net cash provided (used in) by operating activities: Depreciation 2,480 2,828 Amortization of intangible assets 4,146 3,197 Gain on sale of property and equipment ( 246 ) — Provision for credit losses ( 682 ) 28 Fair value adjustment on contingent consideration — 13 Amortization of debt issuance costs 427 468 Stock compensation expense 380 904 Deferred income taxes 580 941 Changes in operating assets and liabilities: Trade accounts receivable ( 4,191 ) ( 5,183 ) Costs and estimated profits in excess of billings 4,052 ( 3,381 ) Inventories ( 6,310 ) ( 849 ) Prepaid expenses and other assets ( 7,293 ) ( 1,205 ) Trade accounts payable and accrued expenses 9,934 3,599 Billings in excess of costs and estimated profits 1,884 ( 7,327 ) Other long-term liabilities 3,257 ( 1,635 ) Net cash provided by (used in) operating activities $ 8,577 $ ( 1,612 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 680 ) ( 3,235 ) Proceeds from the sale of property and equipment 1,297 — Acquisition of business, net of cash acquired — ( 14,153 ) Net cash provided by (used in) investing activities $ 617 $ ( 17,388 ) CASH FLOWS FROM FINANCING ACTIVITIES: Principal debt payments ( 825 ) ( 625 ) Dividends paid ( 23 ) ( 23 ) Payment for employee taxes withheld from stock awards ( 517 ) ( 94 ) Net cash used in financing activities $ ( 1,365 ) $ ( 742 ) Effect of foreign currency on cash 204 ( 1,730 ) Net change in cash and restricted cash 8,033 ( 21,472 ) Cash and restricted cash at beginning of period 119,419 54,326 Cash and restricted cash at end of period $ 127,452 $ 32,854 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 DXP ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (in thousands) (unaudited) Series A preferred stock Series B preferred stock Common stock Paid-in capital Retained earnings Non controlling interest Accum other comp loss Total equity Balance at December 31, 2019 (Restated) $ 1 $ 15 $ 174 $ 157,886 $ 215,664 $ 1,146 $ ( 19,954 ) $ 354,932 Preferred dividends paid — — — — ( 23 ) — — ( 23 ) Compensation expense for restricted stock — — — 904 — — — 904 Tax related items for share based awards — — — ( 94 ) — — — ( 94 ) Issuance of shares of common stock — — 1 1,999 — — — 2,000 Currency translation adjustment — — — — — — ( 1,163 ) ( 1,163 ) Net income — — — — 6,052 ( 62 ) — 5,990 Balance at March 31, 2020 (Restated) $ 1 $ 15 $ 175 $ 160,695 $ 221,693 $ 1,084 $ ( 21,117 ) $ 362,546 Series A preferred stock Series B preferred stock Common stock Paid-in capital Retained earnings Non controlling interest Accum other comp loss Total equity Balance at December 31, 2020 (Restated) $ 1 $ 15 $ 189 $ 192,068 $ 186,078 $ 798 $ ( 18,013 ) $ 361,136 Preferred dividends paid — — — — ( 23 ) — — ( 23 ) Compensation expense for restricted stock — — — 380 — — — 380 Tax related items for share based awards — — — ( 517 ) — — — ( 517 ) Currency translation adjustment — — — — — — 1,277 1,277 Net income — — — — 371 ( 212 ) — 159 Balance at March 31, 2021 (Restated) $ 1 $ 15 $ 189 $ 191,931 $ 186,426 $ 586 $ ( 16,736 ) $ 362,412 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 7 DXP ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - THE COMPANY DXP Enterprises, Inc. together with its subsidiaries (collectively "DXP," "Company," "us," "we," or "our") was incorporated in Texas on July 26, 1996. DXP Enterprises, Inc. and its subsidiaries are engaged in the business of distributing maintenance, repair and operating ("MRO") products and service to a variety of end markets and industrial customers. Additionally, DXP provides integrated, custom pump skid packages, pump remanufacturing and manufactures branded private label pumps to energy and industrial customers. The Company is organized into three business segments: Service Centers ("SC"), Supply Chain Services ("SCS") and Innovative Pumping Solutions ("IPS"). See Note 12 - Segment Reporting for discussion of the business segments. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES Basis of Presentation The Company's financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP"). The accompanying condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and its variable interest entity ("VIE"). The accompanying unaudited condensed consolidated financial statements have been prepared on substantially the same basis as our annual consolidated financial statements and should be read in conjunction with our Annual Report on Form 10-K/A for the year ended December 31, 2020. For a more complete discussion of our significant accounting policies and business practices, refer to the consolidated Annual Report on Form 10-K/A filed with the Securities and Exchange Commission on October 22, 2021. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of results expected for the full fiscal year. In the opinion of management, these condensed consolidated financial statements contain all adjustments necessary to present fairly the Company's condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2021 and March 31, 2020, condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020, condensed consolidated statements of cash flows for the three months ended March 31, 2021 and March 31, 2020, and condensed consolidated statement of equity for the three months ended March 31, 2021 and March 31, 2020. All such adjustments represent normal recurring items. All inter-company accounts and transactions have been eliminated upon consolidation. NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS Accounting Pronouncements Not Yet Adopted In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . This update provides optional expedients and exceptions for applying generally accepted accounting principles to certain contract modifications and hedging relationships that reference London Inter-bank Offered Rate (LIBOR) or another reference rate expected to be discontinued. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company is currently evaluating the potential impact of this ASU on the financial statements. All other new accounting pronouncements that have been issued but not yet effective are currently being evaluated and at this time are not expected to have a material impact on our financial position or results of operations. 8 NOTE 4 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS As previously reported, the Company restated its consolidated balance sheets as of December 31, 2020 and 2019, and consolidated statements of earnings, cash flows, and comprehensive income and retained earnings for the years ended December 31, 2020, 2019 and 2018. The restatement also affected periods prior to 2018. The impact of the restatement on such prior periods was reflected as a n adjustment to retained earnings as of January 1, 2018. In addition, the restatement impacts the first, second and third quarters of 2020 and the first quarter of 2021. The restated amounts for the comparable interim period in 2020 are presented below. The restatement corrects errors resulting from the failure to timely clear aged payables resulting from the Company's three-way match process discrepancies, the recognition of additional consideration related to a business combination, as well as certain additional adjustments that the Company has determined to be immaterial, both individually and in aggregate. Set forth below are the restatement adjustments included in the restatement of the previously issued financial statements for the year ended December 31, 2020, and the quarters ended March 31, 2020 and March 31, 2021, each of which is an “error” within the meaning of ASC Topic 250: Accounting Changes and Error Corrections. The following tables presents the impact of the restatement adjustments described below on net income and comprehensive income for the quarter ended March 31, 2021 and 2020: For the Three Months Ended March 31, 2021 For the Three Months Ended March 31, 2020 As previously reported As previously reported Adjustments As restated Adjustments As restated CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS Sales $ 245,616 $ ( 29 ) $ 245,587 $ 300,983 $ — $ 300,983 Cost of sales 174,007 ( 50 ) 173,957 216,998 871 217,869 Gross profit 71,609 21 71,630 83,985 ( 871 ) 83,114 Selling, general and administrative costs 65,397 — 65,397 73,070 ( 1,275 ) 71,795 Income before income taxes 1,399 21 1,420 7,372 404 7,776 Provision for income taxes 1,271 ( 10 ) 1,261 1,724 62 1,786 Net income $ 128 $ 31 $ 159 $ 5,648 $ 342 $ 5,990 Basic earnings per share $ 0.02 $ — $ 0.02 $ 0.32 $ 0.02 $ 0.34 Diluted earnings per share $ 0.02 $ — $ 0.02 $ 0.31 $ 0.01 $ 0.32 For the Three Months Ended March 31, 2021 For the Three Months Ended March 31, 2020 As previously reported As previously reported Adjustments As restated Adjustments As restated CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Net income 128 31 159 5,648 342 5,990 Total comprehensive income 5,234 ( 3,798 ) 1,436 4,485 342 4,827 9 Adjustments to Net Sales and Related Adjustments to Cost of Products Sold Unvouchered Purchase Orders The Company determined it had aged unvouchered purchase orders included in trade accounts payable. After lengthy investigation and research, DXP determined that these balances were not valid legal obligations to vendors and will not be invoiced or paid. As a result, the Company wrote off the aged balances that no longer represented legal obligations, resulting in a net reduction in accounts payable. Landed cost inventory adjustment The Company determined that cost mark-ups for landed costs for certain inventory items related to our private label pumps had not been properly relieved upon the sale of these items . Direct shipment cut off adjustment Direct shipment orders placed near period end may not be properly reflected in the correct period. The Company adjusted sales and cost of goods sold for items recorded in the incorrect period, as well as accounts receivable and payable. Other Adjustments to Earnings from Continuing Operations Before Non-Controlling Interest and Income Taxes Cut-off for credit card payment accruals In January 2020, the Company recorded its monthly payment for its P-Card credit card program, however, the charges were incurred in December 2019. This adjustment reflects the accrual in the correct period, resulting in a shift in other current liabilities between periods. Sales tax payable accruals The Company increased other current liabilities for its accrual for state sales tax obligations stemming from open audits. Adjustments to Provision for Income Taxes The adjustments reflected for the provision for income taxes are the tax consequences of the above listed corrections. Balance sheet adjustments related to purchase accounting and consolidation On December 31, 2020, DXP closed on the acquisition of four businesses. The owners of two of the targets were eligible for true-up consideration based upon the closing financial results of calendar year 2020. This true-up consideration was paid in July 2021; however, the amount of true-up consideration was deemed to have been accrued as of the closing of the acquisitions. Therefore this adjustment resulted in an accrual for the true-up consideration and an increase in goodwill of $ 13.4 million. As described above, the unvouchered purchase order discrepancies resulted in a reduction of accounts payable in the amount of $ 12.2 million as of December 31, 2020 and March 31, 2021. During the consolidation of the four acquisitions closed on December 31, 2020, the Company improperly reflected the cash on hand at the targets as an increase in cumulative translation adjustment and other comprehensive income for approximately $ 2 million. This reclassification adjustment properly records the increase in cash and restricted cash upon closing. In addition, cumulative translation adjustment was also reduced by $ 1.8 million as a result of a reclassification associated with trade accounts receivable. 10 The following table presents the impact of the restatement adjustments on the Company’s previously reported balance sheets as of December 31, 2020 and March 31, 2021 on a condensed basis: BALANCE SHEET (AT DECEMBER 31, 2020): As Reported Adjustments As restated Cash and restricted cash $ 117,444 $ 1,975 $ 119,419 Accounts Receivable 163,429 3,512 166,941 Federal income taxes receivable 5,632 ( 2,645 ) 2,987 Goodwill 248,339 13,428 261,767 Total Assets $ 851,861 $ 16,270 $ 868,131 Accounts Payable $ 75,744 $ ( 10,895 ) $ 64,849 Other current liabilities 20,834 13,895 34,729 Deferred Taxes 1,777 — 1,777 Total Liabilities $ 503,995 $ 3,000 $ 506,995 — Accumulated other comprehensive loss $ ( 21,842 ) $ 3,829 $ ( 18,013 ) Retained Earnings 176,637 9,441 186,078 Equity 347,866 13,270 361,136 Total Liabilities & Equity $ 851,861 $ 16,270 $ 868,131 As BALANCE SHEET (AT MARCH 31, 2021): Reported Adjustments As restated Cash and restricted cash $ 127,452 $ — $ 127,452 Accounts Receivable 168,003 1,629 169,632 Federal income taxes receivable 5,773 ( 2,539 ) 3,234 Goodwill 248,499 13,428 261,927 Total Assets $ 869,482 $ 12,518 $ 882,000 Accounts Payable $ 81,595 $ ( 10,945 ) $ 70,650 Other current liabilities 21,775 13,870 35,645 Deferred Taxes 2,248 121 2,369 Total Liabilities $ 516,542 $ 3,046 $ 519,588 Accumulated other comprehensive loss $ ( 16,736 ) $ ( 16,736 ) Retained Earnings 176,954 9,472 186,426 Equity 352,940 9,472 362,412 Total Liabilities & Equity $ 869,482 $ 12,518 $ 882,000 11 The table below presents the impact to Operating Cash Flows on a Condensed Basis as a result of the restatement for the periods ended March 31, 2021 and 2020: For the Three Months Ended March 31, 2021 For the Three Months Ended March 31, 2020 As previously reported As previously reported Adjustments As restated Adjustments As restated CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Net income $ 128 $ 31 $ 159 $ 5,648 $ 342 $ 5,990 Reconciliation of net income to net cash provided (used in) by operating activities: Deferred income taxes 459 121 580 928 13 941 Changes in operating assets and liabilities 3,460 ( 2,127 ) 1,333 ( 15,626 ) ( 355 ) ( 15,981 ) Net cash provided by (used in) operating activities $ 10,552 $ ( 1,975 ) $ 8,577 $ ( 1,612 ) $ — $ ( 1,612 ) NOTE 5 - LEASES The Company frequently utilizes operating leases for buildings, vehicles, machinery and equipment. For more information on lease accounting, see Note 4 - Lease to the consolidated financial statements of the Company's Annual Report on Form 10-K for the year ended December 31, 2020. Supplemental cash flow information related to leases was as follows (in thousands) : Three Months Ended March 31, Three Months Ended March 31, Lease 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 5,058 $ 4,672 Right-of-use assets obtained in exchange for lease liabilities Operating leases 10,126 4,326 Supplemental balance sheet information related to leases was as follows (in thousand) : Lease Classification March 31, 2021 December 31, 2020 Assets Operating Operating lease right-of-use assets $ 59,949 $ 55,188 Liabilities Current operating Short-term operating lease liabilities 17,590 15,891 Non-current operating Long-term operating lease liabilities 41,267 38,010 Total operating lease liabilities $ 58,857 $ 53,901 During the three months ended March 31, 2021, the Company paid $ 0.5 million in current and future lease obligations to entities invested in by the Company’s Chief Executive Officer. 12 NOTE 6 – INVENTORIES The carrying values of inventories are as follows ( in thousands ): March 31, 2021 December 31, 2020 Finished goods $ 103,560 $ 105,527 Work in process 24,699 17,021 Obsolescence reserve ( 24,852 ) ( 25,477 ) Inventories $ 103,407 $ 97,071 NOTE 7 – COSTS AND ESTIMATED PROFITS ON UNCOMPLETED CONTRACTS Under our customized pump production contracts in our IPS segment, amounts are billed as work progresses in accordance with agreed-upon contractual terms, upon various measures of performance, including achievement of certain milestones, completion of specified units, or completion of a contract. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. Our contract assets are presented as “Cost and estimated profits in excess of billings” on our condensed consolidated balance sheets. However, we sometimes receive advances or deposits from our customers before revenue is recognized, resulting in contract liabilities that are presented as “Billings in excess of costs and estimated profits” on our condensed consolidated balance sheets. Costs and estimated profits on uncompleted contracts and related amounts billed were as follows ( in thousands ): March 31, 2021 December 31, 2020 Costs incurred on uncompleted contracts $ 29,426 $ 36,969 Estimated profits, thereon 5,259 6,711 Total 34,685 43,680 Less: billings to date 26,217 29,315 Net $ 8,468 $ 14,365 Such amounts were included in the accompanying condensed Consolidated Balance Sheets for March 31, 2021 and December 31, 2020 under the following captions ( in thousands ): March 31, 2021 December 31, 2020 Costs and estimated profits in excess of billings $ 14,415 $ 18,459 Billings in excess of costs and estimated profits ( 5,950 ) ( 4,061 ) Translation adjustment 3 ( 33 ) Net $ 8,468 $ 14,365 During the three months ended March 31, 2021, $ 0.9 million of the balances that were previously classified as contract liabilities at the beginning of the period shipped. Contract assets and liability changes were primarily due to normal activity and timing differences between our performance and customer payments. NOTE 8 – INCOME TAXES Our effective tax rate from continuing operations was 88.8 percent for the three months ended March 31, 2021 compared to 23.3 percent for the three months ended March 31, 2020. Compared to the U.S. statutory rate for the three months ended March 31, 2021, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions recorded due to tax authorities’ aggressive auditing of research and development tax credits. The effective tax was decreased by research and development tax credits and other credits. Compared to the U.S. statutory rate for the three months ended March 31, 2020, the effective tax rate was increased by state taxes, foreign taxes, and nondeductible expenses and was partially offset by research and development tax credits, foreign tax credits, and other tax credits. To the extent penalties and interest would be assessed on any underpayment of income tax, such accrued amounts would be classified as a component of income tax provision (benefit) in the financial statements consistent with the Company’s policy. 13 NOTE 9 – LONG-TERM DEBT The components of the Company's long-term debt consisted of the following ( in thousands ): March 31, 2021 December 31, 2020 Carrying Value (1) Fair Value Carrying Value (1) Fair Value ABL Revolver $ — $ — $ — $ — Term Loan B 329,175 329,175 330,000 325,875 Total long-term debt 329,175 329,175 330,000 325,875 Less: current portion ( 3,300 ) ( 3,300 ) ( 3,300 ) ( 3,259 ) Long-term debt less current maturities $ 325,875 $ 325,875 $ 326,700 $ 322,616 (1) Carrying value amounts do not include unamortized debt issuance costs of $ 9.1 million and $ 9.6 million for March 31, 2021 and December 31, 2020, respectively . Credit Agreements On March 17, 2020, the Company entered into an Increase Agreement (the "Increase Agreement") that provided for a $ 135.0 million asset-backed revolving line of credit (the "ABL Revolver") a $ 50.0 million increase above the $ 85.0 million original revolver. The Increase Agreement amends and supplements that certain Loan and Security Agreement, dated as of August 29, 2017. As of March 31, 2021, the Company had no amount outstanding under the ABL Revolver and had $ 131.2 million of borrowing capacity, net of the impact of outstanding letters of credit. On December 23, 2020, DXP entered into a new seven year , $ 330 million Senior Secured Term Loan B (the “Term Loan B Agreement”), which replaced DXP’s previously existing Senior Secured Term Loan. The fair value measurements used by the Company are considered Level 2 inputs, as defined in the fair value hierarchy. The fair value estimates were based on quoted prices for identical or similar securities. The Company was in compliance with all financial covenants under the ABL Revolver and Term Loan B Agreements as of March 31, 2021. 14 NOTE 10 - EARNINGS PER SHARE DATA Basic earnings per share is computed based on weighted average shares outstanding and excludes dilutive securities. Diluted earnings per share is computed including the impacts of all potentially dilutive securities. The following table sets forth the computation of basic and diluted earnings per share for the periods indicated ( in thousands, except per share data ): Three Months Ended March 31, 2021 2020 (Restated) (Restated) Basic: Weighted average shares outstanding 19,186 17,713 Net income attributable to DXP Enterprises, Inc. $ 371 $ 6,052 Convertible preferred stock dividend 23 23 Net income attributable to common shareholders $ 348 $ 6,029 Per share amount $ 0.02 $ 0.34 Diluted: Weighted average shares outstanding 19,186 17,713 Assumed conversion of convertible preferred stock 840 840 Total dilutive shares 20,026 18,553 Net income attributable to common shareholders $ 348 $ 6,029 Convertible preferred stock dividend 23 23 Net income attributable to DXP Enterprises, Inc. $ 371 $ 6,052 Per share amount $ 0.02 $ 0.32 NOTE 11 - COMMITMENTS AND CONTINGENCIES From time to time, the Company is a party to various legal proceedings arising in the ordinary course of business. While DXP is unable to predict the outcome of these lawsuits, it believes that the ultimate resolution will not have, either individually or in the aggregate, a material adverse effect on DXP's consolidated financial position, cash flows, or results of operations. NOTE 12 - SEGMENT REPORTING The Company's reportable business segments are: Service Centers, Innovative Pumping Solutions and Supply Chain Services. The Service Centers segment is engaged in providing maintenance, MRO products, equipment and integrated services, including logistics capabilities, to industrial customers. The Service Centers segment provides a wide range of MRO products in the rotating equipment, bearing, power transmission, hose, fluid power, metal working, industrial supply, safety products and safety services categories. The Innovative Pumping Solutions segment fabricates and assembles custom-made pump packages, re-manufactures pumps and manufactures branded private label pumps. The Supply Chain Services segment provides a wide range of MRO products and manages all or part of a customer's supply chain, including warehouse and inventory management. The high degree of integration of the Company's operations necessitates the use of a substantial number of allocations and apportionments in the determination of business segment information. Sales are shown net of inter-segment eliminations. 15 The following table sets out financial information related to the Company's segments excluding amortization ( in thousands ): Three Months Ended March 31, 2021 2020 (Restated) (Restated) SC IPS SCS Total SC IPS SCS Total Product sales 1 $ 165,342 $ — $ 31,777 $ 197,119 $ 169,795 $ — $ 44,152 $ 213,947 Inventory services 2 — — 4,196 4,196 — — 4,225 4,225 Staffing services 3 21,027 — — 21,027 12,790 — — 12,790 Pump production 4 — 23,245 — 23,245 — 70,021 — 70,021 Total Revenue $ 186,369 $ 23,245 $ 35,973 $ 245,587 $ 182,585 $ 70,021 $ 48,377 $ 300,983 Income (loss) from operations $ 22,137 $ 947 $ 2,323 $ 25,407 $ 17,330 $ 10,428 $ 3,755 $ 31,513 1 Product sales that are recognized at a point in time. 2 Inventory management services that are recognized over the contract life. 3 Staffing services that are invoiced on a day-rate basis. 4 Custom pump production is recognized over time. The following table presents reconciliations of operating income for reportable segments to the consolidated income before taxes ( in thousands ): Three Months Ended March 31, 2021 2020 (Restated) (Restated) Operating income for reportable segments $ 25,407 $ 31,513 Adjustment for: Amortization of intangible assets 4,146 3,197 Impairment and other charges — — Corporate expenses 15,028 16,997 Income (loss) from operations $ 6,233 $ 11,319 Interest expense 5,243 4,377 Other (income) expense, net ( 430 ) ( 834 ) Income (loss) before income taxes $ 1,420 $ 7,776 NOTE 13 - SUBSEQUENT EVENTS On April 30, 2021, the Company completed the acquisition of Carter & Verplanck, LLC (“CVI”), a distributor of products and services exclusively focused on serving the water and wastewater markets. The acquisition of CVI was funded with cash on hand as well as issuing DXP's common stock and is subject to normal transaction adjustments for a transaction of this size and nature, including working capital true-ups. 16