What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-04-05 compared with 2021-03-18 · 60 added, 26 removed, 207 unchanged (29% of the section changed)

23 unchanged sentences

• Cybersecurity breaches and other disruptions or misuse of our network and information systems could affect our ability to conduct our business effectively.

• Our backlog is subject to unexpected adjustments and potential cancellations

• Our actual results could differ from the assumptions and estimates used to prepare our financial statements

• If we do not successfully remediate our internal controls weaknesses, our financial statements may not be accurate and the trading price of our stock could be negatively impacted.

Market and Economy

1 unchanged sentence

• A general slowdown in the economy could negatively impact DXP’s sales growth and profitability.

• We could be adversely impacted by sustained low oil prices, volatility in oil prices and downturns in the energy industry, including decreased capital expenditures, impacting our customers’ demand for our products and services.

• We could be adversely impacted by low oil prices, volatility in oil prices and downturns in the energy industry, including decreased capital expenditures, impacting our customers’ demand for our products and services.

• Adverse weather events or natural disasters could negatively disrupt our operations.

28 unchanged sentences

Our utilization of these delivery services for shipments is subject to risks, including increases in fuel prices, labor availability, labor strikes and inclement weather, which may impact a shipping company’s ability to provide delivery services that adequately meet our shipping needs.

If we change the shipping companies we use, we could face logistical difficulties that could adversely affect deliveries and we would incur costs and expend resources in connection with such change.

If we change the shipping companies we use, we could face

logistical difficulties that could adversely affect deliveries and we would incur costs and expend resources in connection with such change.

In addition, we may not be able to obtain favorable terms as we have with our current third-party transportation providers.

8 unchanged sentences

The loss of the services of any of the executive officers of the Company could have a material adverse effect on our financial condition and results of operations.

In addition, our ability to grow successfully will be dependent upon our ability to attract and

retain qualified management and technical and operational personnel.

In addition, our ability to grow successfully will be dependent upon our ability to attract and retain qualified management and technical and operational personnel.

The failure to attract and retain such persons could materially adversely affect our financial condition and results of operations.

29 unchanged sentences

Our information systems are vulnerable to natural disasters, power losses, telecommunication failures and other problems despite the protection of our information systems through physical and software safeguards and remote processing capabilities.

If critical information systems fail or are otherwise unavailable, DXP’s ability to procure products to sell, process and ship customer orders, identify

business opportunities, maintain proper levels of inventories, collect accounts receivable and pay accounts payable and expenses could be adversely affected.

If critical information systems fail or are otherwise unavailable, DXP’s ability to procure products to sell, process and ship customer orders, identify business opportunities, maintain proper levels of inventories, collect accounts receivable and pay accounts payable and expenses could be adversely affected.

Cybersecurity breaches and other disruptions or misuse of our network and information systems could affect our ability to conduct our business effectively.

13 unchanged sentences

information systems, our data security could result in a disruption of our services or improper disclosure of personal data or confidential information, which could harm our reputation, require us to expend resources to remedy such a security breach or defend against further attacks or subject us to liability under laws that protect personal data, resulting in increased operating costs or loss of revenue.

Our backlog is subject to unexpected adjustments and potential cancellations

Our backlog generally consists of projects for which we have an executed contract or commitment with a client and reflects our expected revenue from the contract or commitment, which is often subject to revision over time.

We cannot guarantee that the revenue projected in our backlog will be realized or profitable or will not be subject to delay or suspension.

Project cancellations, scope adjustments or deferrals, may occur with respect to contracts reflected in our backlog and could reduce the dollar amount of our backlog and the revenue and profits that we actually earn;

or, may cause the rate at which we perform on our backlog to decrease.

Our contracts typically provide for the payment of fees earned through the date of termination and the reimbursement of costs incurred including demobilization costs.

In addition, projects may remain in our backlog for an extended period of time.

During periods of economic slowdown, or decreases and/or instability in oil prices, the risk of projects

being suspended, delayed or canceled generally increases.

Finally, poor project or contract performance could also impact our backlog.

Such developments could have a material adverse effect on our business and our profits.

Our actual results could differ from the assumptions and estimates used to prepare our financial statements

In preparing our financial statements, we make estimates and assumptions that affect the reported values of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities.

Areas requiring significant estimates by our management include:

• recognition of revenue, costs, profits or losses;

• recognition of recoveries under contract change orders or claims;

• estimated amounts for project losses, warranty costs, contract close-out or other costs;

• income tax provisions and related valuation allowances;

• accruals for other estimated liabilities, including litigation and insurance reserves and receivables.

Estimates are based on management's reasonable assumptions and experience, but are only estimates.

Our actual business and financial results could differ from our estimates of such results due to changes in facts and circumstances, which could have a material negative impact on our financial condition and reported results of operations.

Further, we recognize contract revenue as work on a contract progresses.

The cumulative amount of revenue recorded on a contract at any point in time is the costs incurred to date versus the estimated total costs.

Accordingly, contract revenue and total cost estimates are reviewed and revised as the work progresses.

Adjustments are reflected in contract revenue in the period when such estimates are revised.

Such adjustments could be material and could result in reduced profitability.

If we do not successfully remediate our internal controls weaknesses, our financial statements may not be accurate and the trading price of our stock could be negatively impacted.

As discussed in Item 9A, “Management's Report on Internal Controls Over Financial Reporting,” we concluded we have material weaknesses in our internal controls during 2021.

If we fail to successfully remediate these weaknesses, our financial statements may not be accurate and the trading price of our stock could be negatively impacted.

Risks Related to the Market and Economy

The COVID-19 pandemic has and could continue to result in disruptions in supply chain, decreased customer demand, lower oil price and volatility in the stock market and the global economy, which could negatively impact our business, financial position, and results of operations.

The COVID-19 pandemic is creating extensive disruptions to the global economy and to the lives of individuals throughout the world.

During the first few months on 2020, COVID-19 has spread globally, resulting in certain supply chain disruptions, volatility in the stock market, lower oil prices, and a lockdown in international travel, all of which has and could continue to adversely impact the global economy and has and could potentially continue to decrease demand from our customers.

While the scope, duration, and full effects of COVID-19 are rapidly evolving and not fully known, the pandemic and related efforts to contain it have disrupted global economic activity and increased economic and market uncertainty.

Further, a COVID-19 outbreak at one of our vendors’ or customers’ facilities could adversely impact or disrupt our operations.

The pandemic has impacted our customers spending and these types of events could negatively impact our customers’ spending in the impacted regions or, depending upon the severity, globally, which could adversely impact our business, reputation, results of operations or financial conditions.

If these effects continue for a prolonged period or result in sustained economic stress or recession, many of the risk factors identified in our Form 10-K could be exacerbated and such effects could have a material adverse impact on us in a number of ways.

Because there have been no comparable recent global pandemics that resulted in similar global impact, we do not know the full extent of COVID-19’s effects on our business, operations, or the global economy as a whole.

Any future development will be highly uncertain and cannot be predicted, including the scope and duration of the pandemic and any actions taken by governmental authorities and other third parties in response to the pandemic.

While we do not know the full extent of the impact on our business, our operations or the global economy as a whole, the effects could have a material adverse effect on our business, financial condition, and results of operations.

The COVID-19 pandemic created extensive disruptions to the global economy and to the lives of individuals throughout the world.

COVID-19 spread globally during the first few months of 2020, resulting in certain supply chain disruptions, volatility in the stock market, lower oil prices, and a lockdown in international travel, all of which continued to adversely impact the global economy and may potentially impact future demand from our customers.

While the scope, duration, and long-term effects of COVID-19 are rapidly evolving and not fully known, the pandemic and related efforts to contain it disrupted global economic activity and increased economic and market uncertainty.

Further, a COVID-19 variant outbreak at one of our vendors’ or customers’ facilities could adversely impact or disrupt our operations.

The pandemic impacted our customers spending and we have experienced these types of events negatively impacting our customers’ spending in certain regions or, depending upon the severity, globally, which can adversely impact our business, reputation, results of operations or financial conditions.

If these effects resurface or continue for a prolonged period or result in sustained economic stress or recession, many of the risk factors identified in our Form 10-K could be exacerbated and such effects could have a material adverse impact on us in a number of ways.

Because there have been no comparable recent global pandemics that resulted in similar global impact, we do not know the lingering extent of COVID-19’s effects on our business, operations, or the global economy as a whole.

While we do not know the long-term impact on our business, our operations or the global economy as a whole, the effects could have a prolonged material adverse effect on our business, financial condition, and results of operations.

Our success depends in large part on the performance of our executive management team and other key personnel, as well as on our ability to attract, motivate and retain highly qualified senior and middle management and other skilled employees.

Competition for qualified employees is intense and the process of locating qualified key personnel may be lengthy and

If any of our executive management team contract COVID-19, we may lose their services for an extended period of time, which would likely have a negative impact on our business and operations.

If we experience widespread cases of COVID-19 among our employees, it would place more pressure on the remaining employees to perform all functions across the organization while maintaining their health, may require us to take remediation measures, and could impair our ability to conduct business.

Competition for qualified employees is intense and the process of locating qualified key personnel may be lengthy and expensive.

If any of our executive management team contract COVID-19, we may lose their services for an extended period of

time, which would likely have a negative impact on our business and operations.

If we experience widespread cases of COVID-19 or its variants among our employees, it would place more pressure on the remaining employees to perform all functions across the organization while maintaining their health, may require us to take remediation measures, and could impair our ability to conduct business.

We may not be successful in retaining our key employees or finding adequate replacements for lost personnel.

5 unchanged sentences

We traditionally do not enter into long-term contracts with our customers which increases the likelihood that economic downturns would affect our business.

We could be adversely impacted by sustained low oil prices, volatility in oil prices and downturns in the energy industry, including decreased capital expenditures, impacting our customers’ demand for our products and services.

We could be adversely impacted by low oil prices, volatility in oil prices and downturns in the energy industry, including decreased capital expenditures, impacting our customers’ demand for our products and services.

A significant portion of our revenue depends upon the level of capital and operating expenditures in the oil and natural gas industry, including capital expenditures in connection with the upstream, midstream, and downstream phases in the energy industry.

Therefore, a significant decline in oil or natural gas prices could lead to a decrease in our customers’ capital and other expenditures and could adversely affect our revenues.

Sustained low oil prices or the failure of oil prices to rise in the future and the resulting downturns or lack of growth in the energy industry and energy related business could adversely impact our results of operations and financial condition.

The unprecedented sharp decline in crude oil prices since February 2020 has negatively impacted the oil and gas industry and is expected to cause further worsening conditions of energy companies, oilfield services companies, and related businesses.

Low oil prices and the resulting downturns or lack of growth in the energy industry and energy related business could adversely impact our results of operations and financial condition.

The volatility of crude oil prices since February 2020 has negatively impacted the oil and gas industry and may cause worsening conditions of energy companies, oilfield services companies, and related businesses.

Therefore, sustained low oil and natural gas prices or a continued decline of such prices could lead to a decrease in our customers’ capital and other expenditures and could adversely affect our revenues.

Oil and gas pricing and the resultant economic conditions may not recover meaningfully in the near term.

Therefore, sustained low oil and natural gas prices or a decline of such prices could lead to a decrease in our customers’ capital and other expenditures and could adversely affect our revenues.

Adverse weather events or natural disasters could negatively disrupt our operations.

12 unchanged sentences

Our credit facilities require the Company to comply with certain specified covenants, restrictions, financial ratios and other financial and operating tests.

The Company’s ability to comply with any of the foregoing restrictions will depend on its future performance, which will be subject to prevailing economic conditions and other factors, including factors beyond the Company’s control.

The Company’s ability to comply with any of the foregoing restrictions will depend on its future

performance, which will be subject to prevailing economic conditions and other factors, including factors beyond the Company’s control.

A failure to comply with any of these obligations could result in an event of default under the credit facilities, which could permit acceleration of the Company’s indebtedness under the credit facilities.

27 unchanged sentences

In addition, our products are integral to the production process for some end-users, and a failure of our products could result in a business interruption of their operations.

Although we maintain quality controls and procedures, our products may not be completely free from defects and/or malfunction or failure.

Although we maintain quality controls and procedures, our

products may not be completely free from defects and/or malfunction or failure.

We maintain various levels and types of insurance coverage that we believe are adequate and commensurate with normal industry practice for a company of our risk profile, relative size, and we further limit our liability by contract wherever possible.

33 unchanged sentences

We are also subject to audits and inquiries in the ordinary course of business.

Changes to the legal and regulatory environments could increase the cost of doing business, and such costs may increase in the future as a result of changes in these laws and regulations or in their interpretation.

Changes to the legal and regulatory environments could increase the cost of doing business, and such costs

may increase in the future as a result of changes in these laws and regulations or in their interpretation.

Our employees, contractors or agents may violate laws and regulations despite our attempts to implement policies and procedures to comply with such laws and regulations.

2 unchanged sentences

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-K

Item 1A. Risk Factors