What changed in this filing

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Item 1. Financial Statements

2021-11-05 compared with 2021-05-10 · 233 added, 71 removed, 242 unchanged (56% of the section changed)

4 unchanged sentences

(in thousands, except per share amounts) (unaudited)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(Restated) (Restated)

Sales $ 285,691 $ 251,401 $ 531,278 $ 552,384

3 unchanged sentences

Income from operations 14,846 7,138 21,079 18,457

Other income ( 430 ) ( 834 )

Other (income) expense ( 105 ) 133 ( 535 ) ( 701 )

Interest expense 5,337 3,930 10,580 8,307

4 unchanged sentences

Net income attributable to DXP Enterprises, Inc.

8,119 2,427 8,490 8,479

Preferred stock dividend 22 22 45 45

14 unchanged sentences

(in thousands, except share and per share data) (unaudited)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

ASSETS (Restated)

Current assets:

34 unchanged sentences

1,000,000 shares authorized each

Common stock, $ 0.01 par value, 100,000,000 shares authorized;

Common stock, $ 0.01 par value, 100,000,000 shares authoriz ed;

18,558,674 and 19,208,067 outstanding

2 unchanged sentences

Accumulated other comprehensive loss ( 15,409 ) ( 18,013 )

Treasury stock, at cost 1,014,053 shares a t June 30, 2021

Total DXP Enterprises, Inc.

8 unchanged sentences

(in thousands) (unaudited)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

8 unchanged sentences

Provision for credit losses ( 637 ) 434

Payment of contingent consideration liability in excess of acquisition-date fair value ( 145 ) ( 136 )

Fair value adjustment on contingent consideration — 25

2 unchanged sentences

Deferred income taxes 1,068 188

Changes in operating assets and liabilities:

Trade accounts receivable ( 2,245 ) ( 5,183 )

Costs and estimated profits in excess of billings 4,052 ( 3,381 )

Inventories ( 6,310 ) ( 2,215 )

Prepaid expenses and other assets ( 7,293 ) ( 1,933 )

Trade accounts payable and accrued expenses 10,115 6,048

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 $ 10,552 $ ( 1,612 )

Net change in operating assets and liabilities ( 7,201 ) 38,084

Net cash provided by operating activities $ 16,206 $ 61,764

CASH FLOWS FROM INVESTING ACTIVITIES:

2 unchanged sentences

Acquisition of business, net of cash acquired ( 44,435 ) ( 14,153 )

Net cash provided by (used in) investing activities $ 617 $ ( 17,388 )

Net cash used in investing activities $ ( 44,664 ) $ ( 19,163 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Principal debt payments ( 1,650 ) ( 16,250 )

Issuance of Common Stock- shares sold in public market — 1,142

Payment for contingent consideration liability ( 955 ) ( 1,864 )

Dividends paid ( 45 ) ( 45 )

Purchase of treasury stock ( 8,769 ) —

Payment for employee taxes withheld from stock awards ( 585 ) ( 116 )

4 unchanged sentences

Cash and restricted cash at end of period $ 79,260 $ 78,769

Supplemental schedule of non-cash investing and financing activities:

Shares issued for the acquisition of CVI (Note 12)

Share repurchase agreement $ 20,405 $ —

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3 unchanged sentences

(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 $ 1 $ 15 $ 174 $ 157,886 $ 205,680 $ 1,146 $ ( 19,954 ) $ 344,948

Series A preferred stock Series B preferred stock Common stock Paid-in capital Retained earnings Treasury stock Non controlling interest Accum other comp loss Total equity

Balance at March 31, 2020 (Restated) $ 1 $ 15 $ 175 $ 160,695 $ 221,693 $ — $ 1,084 $ ( 21,117 ) $ 362,546

Preferred dividends paid — — — — ( 22 ) — — — ( 22 )

Compensation expense for restricted stock — — — 956 — — — — 956

Stock compensation expense — 27 — — — — 27

Tax related items for share based awards — — — ( 22 ) — — — — ( 22 )

Issuance of common stock sold in public markets, net of commissions and fees — — — 1,142 — — — — 1,142

Currency translation adjustment — — — 296 ( 227 ) — — 1,395 1,464

Net income (As restated) — — — — 2,427 — ( 62 ) — 2,365

Balance at June 30, 2020 (Restated) $ 1 $ 15 $ 175 $ 163,094 $ 223,871 $ — $ 1,022 $ ( 19,722 ) $ 368,456

Series A preferred stock Series B preferred stock Common stock Paid-in capital Retained earnings Treasury stock 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 — — — — ( 45 ) — — — ( 45 )

Compensation expense for restricted stock — — — 1,860 — — — — 1,860

Stock compensation expense — — — 27 — — — — 27

Tax related items for share based awards — — — ( 116 ) — — — — ( 116 )

Issuance of shares of common stock — — 1 1,999 — — — — 2,000

Issuance of common stock sold in public markets, net of commissions and fees — — — 1,142 — — — — 1,142

Currency translation adjustment — — — 296 ( 227 ) — 232 301

Net income (As restated) — — — — 8,479 — ( 124 ) — 8,355

Balance at June 30, 2020 (Restated) $ 1 $ 15 $ 175 $ 163,094 $ 223,871 $ — $ 1,022 $ ( 19,722 ) $ 368,456

Series A preferred stock Series B preferred stock Common stock Paid-in capital Retained earnings Treasury stock Non controlling interest Accum other comp loss Total equity

Balance at March 31, 2021 (Restated) $ 1 $ 15 $ 189 $ 191,931 $ 186,426 $ — $ 586 $ ( 16,736 ) $ 362,412

Preferred dividends paid — — — — ( 22 ) — — — ( 22 )

Compensation expense for restricted stock — — — 460 — — — — 460

Tax related items for share based awards — — — ( 69 ) — — — — ( 69 )

Issuance of shares of common stock — — 5 11,240 — — — — 11,245

Currency translation adjustment — — — — — — — 1,327 1,327

Purchase of treasury stock — — — — — ( 29,174 ) — — ( 29,174 )

Net income — — — — 8,119 — ( 189 ) — 7,930

Balance at March 31, 2020

$ 1 $ 15 $ 175 $ 160,695 $ 211,367 $ 1,084 $ ( 21,117 ) $ 352,220

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 $ 1 $ 15 $ 189 $ 192,068 $ 176,637 $ 798 $ ( 21,842 ) $ 347,866

Balance at June 30, 2021 $ 1 $ 15 $ 194 $ 203,562 $ 194,523 $ ( 29,174 ) $ 397 $ ( 15,409 ) $ 354,109

Series A preferred stock Series B preferred stock Common stock Paid-in capital Retained earnings Treasury stock 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 — — — — ( 45 ) — — — ( 45 )

1 unchanged sentence

Tax related items for share based awards — — — ( 586 ) — — — — ( 586 )

Issuance of shares of common stock — — 5 11,240 — — — — 11,245

Currency translation adjustment — — — — — — — 2,604 2,604

Purchase of treasury stock — — — — — ( 29,174 ) — — ( 29,174 )

Net income — — — — 8,490 — ( 401 ) — 8,089

Balance at March 31, 2021

$ 1 $ 15 $ 189 $ 191,931 $ 176,954 $ 586 $ ( 16,736 ) $ 352,940

Balance at June 30, 2021 $ 1 $ 15 $ 194 $ 203,562 $ 194,523 $ ( 29,174 ) $ 397 $ ( 15,409 ) $ 354,109

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

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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 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 filed with the Securities and Exchange Commission on March 18, 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.

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 six months ended June 30, 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 six months ended June 30, 2021 and June 30, 2020, condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020, condensed consolidated statements of cash flows for the six months ended June 30, 2021 and June 30, 2020, and condensed consolidated statement of equity for the six months ended June 30, 2021 and June 30, 2020.

All such adjustments represent normal recurring items.

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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.

NOTE 4 - 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 March 31, 2020

Operating Operating lease right-of-use assets $ 59,949 $ 65,268

Current operating Short-term operating lease liabilities 17,590 15,926

Non-current operating Long-term operating lease liabilities 41,267 47,480

Total operating lease liabilities $ 58,857 $ 63,406

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.

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 operations and comprehensive income, equity and cash flows 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 an 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 errors 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 quarter ended June 30, 2020, 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 and the six months ended June 30, 2020:

For the Three Months Ended June 30, 2020 For the Six Months Ended June 30, 2020

As Previously As Previously

Reported Adjustments As Restated Reported Adjustments As Restated

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Sales $ 251,401 $ 251,401 $ 552,384 $ 552,384

Cost of sales 181,705 ( 385 ) 181,320 398,703 486 399,189

Gross profit 69,696 385 70,081 153,681 ( 486 ) 153,195

Selling, general and administrative costs 62,943 — 62,943 136,013 ( 1,275 ) 134,738

Income before income taxes 2,690 385 3,075 10,062 789 10,851

Provision for income taxes 610 100 710 2,334 162 2,496

Net income $ 2,080 $ 285 $ 2,365 $ 7,728 $ 627 $ 8,355

Basic earnings per share $ 0.12 $ 0.14 $ 0.44 $ 0.48

Diluted earnings per share $ 0.12 $ 0.13 $ 0.42 $ 0.45

For the Three Months Ended June 30, 2020 For the Six Months Ended June 30, 2020

As previously As previously

Reported Adjustments As Restated Reported Adjustments As Restated

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Net income $ 2,080 $ 285 $ 2,365 $ 7,728 $ 627 $ 8,355

Total comprehensive income $ 3,475 $ 285 $ 3,760 $ 7,960 $ 627 $ 8,587

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.

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.

The following table presents the impact of the restatement adjustments on the Company’s previously reported balance sheet as of December 31, 2020 on a condensed basis:

BALANCE SHEET (AT DECEMBER 31, 2020):

Reported Adjustments Restated

Cash and restricted cash $ 117,444 $ 1,975 $ 119,419

Accounts Receivable 163,429 3,512 166,941

Inventory 97,071 — 97,071

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

Total Liabilities $ 503,995 $ 3,000 $ 506,995

Cumulative Translation Adjustment ( 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

The table below presents the impact to Operating Cash Flows on a Condensed Basis as a result of the restatement for the period ended June 30, 2020:

For the Six Months Ended June 30, 2020

As Previously

Reported Adjustments As Restated

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Net income $ 7,728 $ 627 $ 8,355

Reconciliation of net income to net cash provided by operating activities:

Changes in operating assets and liabilities 38,711 ( 627 ) 38,084

Net cash provided by operating activities $ 61,764 $ 61,764

NOTE 5 – INVENTORIES

The carrying values of inventories are as follows ( in thousands ):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Finished goods $ 105,763 $ 105,527

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NOTE 6 – 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.

Under our customized pump production and long-term water and wastewater project 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.

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Costs and estimated profits on uncompleted contracts and related amounts billed were as follows ( in thousands ):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Costs incurred on uncompleted contracts $ 56,184 $ 36,969

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Net $ 14,421 $ 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

Such amounts were included in the accompanying condensed Consolidated Balance Sheets for June 30, 2021 and December 31, 2020 under the following captions ( in thousands ):

June 30, 2021 December 31, 2020

Costs and estimated profits in excess of billings $ 16,718 $ 18,459

2 unchanged sentences

Net $ 14,421 $ 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.

During the six months ended June 30, 2021, $ 3.8 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 7 – INCOME TAXES

Our effective tax rate from continuing operations was a tax expense of 90.9 percent for the three months ended March 31, 2021 compared to a tax expense of 23.3 percent for the three months ended March 31, 2020.

Our effective tax rate from continuing operations was 17.4 percent for the three months ended June 30, 2021 compared to a tax expense of 23.1 percent for the three months ended June 30, 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.

statutory rate for the three months ended June 30, 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 tax 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.

statutory rate for the three months ended June 30, 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 and other tax credits.

Our effective tax rate from continuing operations was a tax expense of 26.7 percent for the six months ended June 30, 2021 compared to a tax expense of 23.0 percent for the six months ended June 30, 2020.

Compared to the U.S.

statutory rate for the six months ended June 30, 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 tax credits.

Compared to the U.S.

statutory rate for the six months ended June 30, 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 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.

1 unchanged sentence

The components of the Company's long-term debt consisted of the following ( in thousands ):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Carrying Value (1)

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Long-term debt less current maturities $ 325,050 $ 325,050 $ 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 .

(1) Carrying value amounts do not include unamortized debt issuance costs of $ 8.7 million and $ 9.6 million for June 30, 2021 and December 31, 2020, respectively .

Credit Agreements

1 unchanged sentence

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.

As of June 30, 2021, the Company had no amount outstanding under the ABL Revolver and had $ 131.3 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.

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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.

The Company was in compliance with all financial covenants under the ABL Revolver and Term Loan B Agreements as of June 30, 2021.

NOTE 9 - EARNINGS PER SHARE DATA

2 unchanged sentences

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,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(Restated) (Restated)

Weighted average shares outstanding 19,291 17,735 19,239 17,719

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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 is engaged in providing maintenance, repair and operating 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 Innovative Pumping Solutions segment fabricates and assembles custom-made pump packages, re-manufactures pumps, manufactures branded private label pumps and provides products and process lines for the water and wastewater treatment industries.

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.

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The following table sets out financial information related to the Company's segments excluding amortization ( in thousands ):

Three Months Ended March 31,

Three Months Ended June 30,

SC IPS SCS Total SC IPS SCS Total

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24,144 — — 24,144 9,562 — — 9,562

Pump production 4

Pump production and delivery 4

— 36,727 — 36,727 — 60,479 — 60,479

Total Revenue $ 209,633 $ 36,727 $ 39,331 $ 285,691 $ 153,848 $ 60,479 $ 37,074 $ 251,401

Income (loss) from operations $ 22,116 $ 947 $ 2,323 $ 25,386 $ 16,926 $ 10,428 $ 3,755 $ 31,109

Income from operations $ 26,300 $ 4,803 $ 3,488 $ 34,591 $ 14,050 $ 8,565 $ 3,353 $ 25,968

Six Months Ended June 30,

SC IPS SCS Total SC IPS SCS Total

Product sales 1

$ 350,831 $ — $ 66,845 $ 417,676 $ 314,081 $ — $ 77,140 $ 391,221

Inventory services 2

— — 8,459 8,459 — — 8,311 8,311

Staffing services 3

45,171 — — 45,171 22,352 — — 22,352

Pump production and delivery 4

— 59,972 — 59,972 — 130,500 — 130,500

Total Revenue $ 396,002 $ 59,972 $ 75,304 $ 531,278 $ 336,433 $ 130,500 $ 85,451 $ 552,384

Income from operations $ 48,437 $ 5,751 $ 5,810 $ 59,998 $ 31,379 $ 18,993 $ 7,108 $ 57,480

1 Product sales that are recognized at a point in time.

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3 Staffing services that are invoiced on a day-rate basis.

4 Custom pump production is recognized over time.

4 Custom pump production and delivery 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,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(Restated) (Restated)

Operating income for reportable segments $ 34,591 $ 25,968 $ 59,998 $ 57,480

1 unchanged sentence

Amortization of intangible assets 4,306 3,046 8,452 6,243

Impairment and other charges — —

Corporate expenses 15,439 15,784 30,467 32,780

Income (loss) from operations $ 6,212 $ 10,915

Income from operations $ 14,846 $ 7,138 21,079 18,457

Interest expense 5,337 3,930 10,580 8,307

Other (income) expense, net ( 105 ) 133 ( 535 ) ( 701 )

Income (loss) before income taxes $ 1,399 $ 7,372

NOTE 12 - SUBSEQUENT EVENTS

Income before income taxes $ 9,614 $ 3,075 $ 11,034 $ 10,851

NOTE 12 - BUSINESS ACQUISITIONS

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.

The Company paid approximately $ 49.7 million in cash and stock.

For the six months ended June 30, 2021, CVI contributed sales of $ 5.2 million and net income of $ 1.1 million.

A majority of CVI's sales are project-based work under the percentage-of-completion accounting model.

As a result, CVI has been included in the IPS segment.

Purchase Price Consideration (in millions)

Total Consideration

Cash payments $ 40.8

Fair value of stock issued 8.9

Total purchase price consideration $ 49.7

The fair value of the approximately 352,000 common shares issued was determined based on the closing market price of the Company’s common shares on the acquisition date, adjusted for holding restrictions following consummation.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:

(In thousands)

Accounts receivable $ 4,397

Costs in excess of billings 2,484

Non-compete agreements 730

Customer relationships 10,676

Goodwill 38,612

Property and equipment 85

Other assets 2,456

Assets acquired $ 59,440

Current liabilities assumed ( 9,781 )

Net assets acquired $ 49,659

The following represents the pro forma unaudited revenue and earnings as if CVI had been included in the consolidated results of the Company for the six months ended June 20, 2020 and 2021, respectively:

Six months Ended June 30,

(in thousands/unaudited)

Revenue $ 558,630 $ 536,576

Net income $ 7,938 $ 8,010

Of the $ 50 million of acquired intangible assets, $ 0.7 million was provisionally assigned to non-compete agreements that are subject to amortization over 5 years, coincident with the terms of the agreements.

In addition, $ 10.7 million was assigned to customer relationships, and will be amortized over a period of 8 years.

The $ 38.6 million of goodwill was assigned to the Innovative Pumping Solutions segment.

The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of CVI.

None of the goodwill is expected to be deductible for income tax purposes.

The fair value of accounts receivables acquired is $ 4.4 million, which approximated book value.

The Company recognized less than $ 200,000 of acquisition related costs that were expensed in the current period.

These costs are included in the consolidated income statement in Selling, General and Administrative costs.

The Company also recognized

an immaterial amount in costs associated with issuing the shares issued as consideration in the business combination.

Those costs were deducted from the recognized proceeds of issuance within stockholders’ equity.

NOTE 13 - SHARE REPURCHASE

On May 12, 2021, the Company announced that its Board of Directors authorized a share repurchase program (the “program”) under which up to $ 85.0 million or 1.5 million shares of its outstanding common stock may be acquired in the open market over the next 24 months at the discretion of management.

During the three and six months ended June 30, 2021, the Company repurchased 1.0 million shares of common stock for $ 29.2 million at an average price of $ 28.77 per share.

Total consideration paid to repurchase the shares was recorded in shareholders’ equity as treasury shares.

Such consideration was funded with existing cash balances and an agreement to pay sellers over four equal installments beginning on June 15, 2021.

The remaining three installments totaling $ 20.4 million were included in other current liabilities as of June 30, 2021.

Three Months Ended June 30, Six Months Ended June 30,

(in millions, except per share data) 2021 2021

Total number of shares purchased 1.0 1.0

Amount paid $ 29.2 $ 29.2

Average price paid per share $ 28.77 $ 28.77

NOTE 14 - SUBSEQUENT EVENTS

On July 1, 2021, the Company completed the acquisition of Process Machinery, LLC (“Process Machinery”), a distributor of pumps, mechanical seals, tank, filters and related process equipment that focuses on serving the chemical, power, pulp & paper, mining, metals and food processing industries.

The acquisition of Process Machinery was funded with cash on hand as well as issuing DXP's common stock.

The Company paid approximately $ 10 million in cash and stock.

In September 2021, the Company completed the acquisition of Premier Water, a distributor and provider of products and services exclusively focused on serving the water and wastewater treatment markets in North and South Carolina.The acquisition was also funded with a combination of cash on hand and stock.

The Company paid approximately $ 6 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements