dxpe-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


			☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended June 30, 2023


			☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from __________ to __________

Commission file number 0-21513

DXP Enterprises, Inc.

(Exact name of registrant as specified in its charter)


Texas						76-0509661
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

5301 Hollister, Houston, Texas 77040

(Address of principal executive offices, including zip code)

(713) 996-4700


(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class

Trading Symbol

Name of Exchange on which Registered

Common Stock par value $0.01

DXPE

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of registrant's Common Stock, par value $0.01 per share outstanding as of August 4, 2023: 16,727,114.

DXP ENTERPRISES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


		Page
PART I: FINANCIAL INFORMATION
	ITEM 1. Financial Statements	3
	a) Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income	3
	b) Unaudited Condensed Consolidated Balance Sheets	4
	c) Unaudited Condensed Consolidated Statements of Cash Flows	5
	d) Unaudited Condensed Consolidated Statements of Equity	6
	e) Notes to Unaudited Condensed Consolidated Financial Statements	7
	ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	14
	ITEM 3. Quantitative and Qualitative Disclosures about Market Risk	21
	ITEM 4. Controls and Procedures	22

PART II: OTHER INFORMATION		23
	ITEM 1. Legal Proceedings	23
	ITEM 1A. Risk Factors	23
	ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	23
	ITEM 3. Default upon Senior Securities	24
	ITEM 4. Mine Safety Disclosures	24
	ITEM 5. Other Information	24
	ITEM 6. Exhibits	25

SIGNATURES		26

PART I: FINANCIAL INFORMATION

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Sales	$	428,040	$	367,812	$	852,307	$	687,223
Cost of sales	296,188		263,550		595,414		488,076
Gross profit	131,852		104,262		256,893		199,147
Selling, general and administrative expenses	94,372		78,342		184,014		151,667
Income from operations	37,480		25,920		72,879		47,480
Other (income) expense, net	(242)		839		(712)		1,377
Interest expense	11,863		5,615		23,384		10,777
Income before income taxes	25,859		19,466		50,207		35,326
Provision for income tax expense	6,805		4,973		13,573		8,305
Net income	19,054		14,493		36,634		27,021
Net income (loss) attributable to noncontrolling interest	—		60		—		(53)
Net income attributable to DXP Enterprises, Inc.	19,054		14,433		36,634		27,074
Preferred stock dividend	22		22		45		45
Net income attributable to common shareholders	$	19,032	$	14,411	$	36,589	$	27,029

Net income	$	19,054	$	14,493	$	36,634	$	27,021
Currency translation adjustments	659		(3,591)		757		(1,922)
Comprehensive income	$	19,713	$	10,902	$	37,391	$	25,099

Earnings per share (Note 9):
Basic	$	1.11	$	0.77	$	2.10	$	1.45
Diluted	$	1.06	$	0.74	$	2.01	$	1.39

Weighted average common shares outstanding:
Basic	17,211		18,766		17,402		18,651
Diluted	18,051		19,606		18,242		19,491

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

DXP ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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



	June 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash	$	15,533	$	46,026
Restricted cash	91		91
Accounts receivable, net of allowance of $8,495 and $7,610, respectively	318,651		320,880
Inventories	104,950		101,392
Costs and estimated profits in excess of billings	46,770		23,588
Prepaid expenses and other current assets	15,274		21,644
Income taxes receivable	7,698		2,493
Total current assets	508,967		516,114
Property and equipment, net	47,538		45,964
Goodwill	342,273		333,759
Other intangible assets, net	72,466		79,585
Operating lease right of use assets, net	54,051		57,402
Other long-term assets	9,138		4,456
Total assets	$	1,034,433	$	1,037,280

LIABILITIES AND EQUITY
Current liabilities:
Current maturities of debt	$	4,369	$	4,369
Trade accounts payable	93,978		100,784
Accrued wages and benefits	28,563		26,260
Customer advances	15,555		20,128
Billings in excess of costs and estimated profits	5,333		10,411

Short-term operating lease liabilities	17,324		18,083
Other current liabilities	42,843		32,866
Total current liabilities	207,965		212,901

Long-term debt, net of unamortized debt issuance costs	408,430		409,205
Long-term operating lease liabilities	37,650		40,189
Other long-term liabilities	8,718		4,701
Deferred income taxes liability	2,205		4,892
Total long-term liabilities	457,003		458,987
Total liabilities	664,968		671,888
Commitments and contingencies (Note 10)
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; 16,788,711 and 17,690,069 outstanding, respectively	345		345
Additional paid-in capital	214,852		213,937
Retained earnings	287,138		250,549
Accumulated other comprehensive loss	(30,918)		(31,675)
Treasury stock, at cost 3,523,707 and 2,435,352 shares, respectively	(101,968)		(67,780)
Total DXP Enterprises, Inc. equity	369,465		365,392


Total liabilities and equity	$	1,034,433	$	1,037,280

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

DXP ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)


	Six Months Ended June 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	36,634		27,021
Reconciliation of net income to net cash provided by operating activities:
Depreciation	4,145		5,006
Amortization of intangible assets and deferred financing costs	10,749		9,742

Provision for credit losses	1,001		314
Payment of contingent consideration liability in excess of acquisition-date fair value	(79)		—
Fair value adjustment on contingent consideration	839		1,689

Restricted stock compensation expense	1,347		863
Deferred income taxes	(6,313)		1,610
Changes in operating assets and liabilities:
Accounts receivables, net	3,815		(50,616)
Costs and estimated profits in excess of billings	(23,151)		(8,466)
Accounts payable and accrued expenses	1,721		42,030
Prepaid expenses and other assets	5,226		(3,328)
Inventories	(3,179)		(15,754)
Billings in excess of costs and estimated profits	(5,095)		(1,502)
Other long-term liabilities	(3,643)		(2,923)
Net cash provided by operating activities	$	24,017	$	5,686

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(5,617)		(1,848)

Acquisition of businesses, net of cash acquired	(8,488)		(44,117)
Net cash used in investing activities	$	(14,105)	$	(45,965)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on asset-backed credit facility	7,870		231,968
Repayments on asset-backed credit facility	(7,870)		(202,844)
Repayments under term loan facility	(2,184)		(1,650)

Payment for acquisition contingent consideration liability	(3,921)		—
Preferred stock dividends paid	(45)		(45)
Shares repurchased held in treasury	(33,583)		(15,116)
Payment for employee taxes withheld from stock awards	(432)		(290)
Net cash (used in) provided by financing activities	$	(40,165)	$	12,023
Effect of foreign currency on cash	(240)		(159)
Net change in cash and restricted cash	(30,493)		(28,415)
Cash and restricted cash at beginning of period	46,117		49,080
Cash and restricted cash at end of period	$	15,624	$	20,665

Supplemental schedule of non-cash investing and financing activities:
Shares issued for acquisitions (Note 12)	—		4,744
Shares repurchased held in treasury (Note 13)	$	(605)	$	—

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

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		Treasury stock		Non controlling interest		Accum other comp loss		Total equity
Balance at December 31, 2022	$	1	$	15	$	345	$	213,937	$	250,549	$	(67,780)	$	—	$	(31,675)	$	365,392
Preferred dividends paid	—		—		—		—		(23)		—		—		—		(23)
Restricted stock compensation expense	—		—		—		476		—		—		—		—		476

Tax related items for share based awards	—		—		—		(104)		—		—		—		—		(104)

Currency translation adjustment	—		—		—		—		—		—		—		98		98
Repurchases of shares	—		—		—		—		—		(9,135)		—		—		(9,135)
Net income (loss)	—		—		—		—		17,580		—		—		—		17,580
Balance at March 31, 2023	1		15		345		214,309		268,106		(76,915)		—		(31,577)		374,284
Preferred dividends paid	—		—		—		—		(22)		—		—		—		(22)
Restricted stock compensation expense	—		—		—		871		—		—		—		—		871

Tax related items for share based awards	—		—		—		(328)		—		—		—		—		(328)

Currency translation adjustment	—		—		—		—		—		—		—		659		659
Repurchases of shares	—		—		—		—		—		(25,053)		—		—		(25,053)
Net income (loss)	—		—		—		—		19,054		—		—		—		19,054
Balance at June 30, 2023	$	1	$	15	$	345	$	214,852	$	287,138	$	(101,968)	$	—	$	(30,918)	$	369,465


	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, 2021	$	1	$	15	$	195	$	206,772	$	202,484	$	(33,511)	$	53	$	(29,282)	$	346,727
Preferred dividends paid	—		—		—		—		(23)		—		—		—		(23)
Restricted stock compensation expense	—		—		—		370		—		—		—		—		370

Tax related items for share based awards	—		—		—		(159)		—		—		—		—		(159)
Issuance of shares of common stock	—		—				527		—		—		—		—		527
Currency translation adjustment	—		—		—		—		—		—		—		1,669		1,669
Repurchases of shares	—		—		—		—		—		(1,513)		—		—		(1,513)
Net income (loss)	—		—		—		—		12,642		—		(113)		—		12,529
Balance at March 31, 2022	1		15		195		207,510		215,103		(35,024)		(60)		(27,613)		360,127
Preferred dividends paid	—		—		—		—		(22)		—		—		—		(22)
Restricted stock compensation expense	—		—		—		493		—		—		—		—		493

Tax related items for share based awards	—		—		—		(131)		—		—		—		—		(131)
Issuance of shares of common stock	—		—		2		4,215		—		—		—		—		4,217
Currency translation adjustment	—		—		—		—		—		—		—		(3,591)		(3,591)

Net income (loss)	—		—		—		—		14,433		—		60		—		14,493
Balance at June 30, 2022	$	1	$	15	$	197	$	212,087	$	229,514	$	(35,024)	$	—	$	(31,204)	$	375,586

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

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," the "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 services to a variety of end markets and business-to-business customers. Additionally, DXP provides integrated, custom pump skid packages, pump remanufacturing and manufactures branded private label pumps to energy and broad industrial customers. The Company is currently organized into three business segments: Service Centers ("SC"), Supply Chain Services ("SCS") and Innovative Pumping Solutions ("IPS"). See Note 11 - 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 accounting principles generally accepted in the United States of America ("US GAAP"). For interim financial reporting not all disclosures normally required in annual consolidated financial statements prepared in accordance with US GAAP are required. The unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2022 that are included in our annual report on Form 10-K filed with the SEC on April 17, 2023 (“Annual Report”). The results of operations for the six months ended June 30, 2023 are not necessarily indicative of results expected for the full fiscal year. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary for the fair statement of the Company's financial position, results of operations and cash flows for the interim periods presented. The ownership interest of noncontrolling investors of the Company's subsidiaries are recorded as noncontrolling interest. All inter-company accounts and transactions have been eliminated in consolidation.

During the fourth quarter of 2022, the Company became aware of a financing cash flow error related to borrowings and repayments on our asset-backed credit facility as a result of the Company inadvertently duplicating journal entries, resulting in the overstatement of financing cash flow activities from borrowings and repayments related to our revolving credit facility. Management's assessment concluded that the errors were not material, individually or in the aggregate, to any prior period unaudited condensed consolidated financial statements. The Company concluded to revise prior period unaudited condensed consolidated financial statements the next time they were reported. Periods not presented herein will be revised, as applicable, in future filings. The unaudited condensed consolidated financial statements included herein, have been revised to correct for the impact of these errors. The revision for the unaudited condensed consolidated statement of cash flows for the six months ended June 30, 2022, is provided in the following table (in thousands):





	As Previously Reported		Adjustments		Revised

Proceeds from asset-backed credit facility	$	235,969	$	(4,001)	$	231,968
Payments on asset-backed credit facility	(206,845)		4,001		(202,844)

The change did not result in a change in net income or earnings per share for the three and six months ended June 30, 2022. Additionally, the change did not result in a change in the unaudited condensed consolidated balance sheets and statements of equity.

NOTE 3 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Company has implemented all new accounting pronouncements that are in effect and is evaluating any new accounting pronouncements that may impact its financial statements, including the new Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers standard. The Company does not believe the new accounting pronouncement will have a material impact on its financial position or results of operations for recent acquisitions.

Accounting Pronouncements Not Yet Adopted

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 - FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

Our acquisitions may include contingent consideration as part of the purchase price. The fair value of the contingent consideration is estimated as of the acquisition date based on the present value of the contingent payments to be made using a weighted probability of possible payments. The unobservable inputs used in the determination of the fair value of the contingent consideration include management's assumptions about the likelihood of payment based on the established benchmarks, discount rates, and an internal rate of return analysis. The fair value measurement includes inputs that are Level 3 inputs as they are not observable in the market. Should actual results increase or decrease as compared to the assumptions used in our analysis, the fair value of the contingent consideration obligations will increase or decrease, up to the contracted limit, as applicable. Changes in the fair value of the contingent earn-out consideration are measured each reporting period and reflected in our results of operations.

As of June 30, 2023, we recorded liabilities in other current and long-term liabilities for contingent consideration associated with the acquisitions of Process Machinery, Inc. ("PMI"), Drydon Equipment, Inc. ("Drydon"), Cisco Air Systems, Inc. ("Cisco"), Sullivan Environmental Technologies, Inc. ("Sullivan"), Florida Valve & Equipment, LLC and Environmental MD, Inc. (collectively,“Florida Valve EMD”) and Riordan Materials Corporation (“Riordan”) of $1.3 million, $1.8 million, $2.3 million, $1.6 million, $0.3 million, and $2.2 million, respectively.

The following table provides a reconciliation of the beginning and ending balances for each category therein, and gains or losses recognized during the six months ended June 30, 2023 (in thousands):



	Contingent Consideration

*Beginning balance at December 31, 2022	$	10,166
Acquisitions and settlements:
Acquisitions (Note 12)	2,498
Settlements	(4,000)
Total remeasurement adjustments:
Changes in fair value recorded in other (income) expense, net	839
*Ending Balance at June 30, 2023	$	9,503



*Amounts included in other current liabilities were $6.1 million and $5.5 million for the periods ending June 30, 2023 and December 31, 2022, respectively. Amounts included in long-term liabilities were $3.4 million and $4.7 million for the periods ending June 30, 2023 and December 31, 2022, respectively.

Sensitivity to Changes in Significant Unobservable Inputs

The significant Level 3 unobservable inputs used in the fair value measurement of contingent consideration related to the acquisitions of PMI, Drydon, Cisco, Sullivan, Florida Valve EMD, and Riordan are annualized EBITDA forecasts developed by the Company's management and the probability of achievement of those EBITDA results. The discount rate used in the calculations was between 9.2 percent and 9.6 percent. Changes in our unobservable inputs in isolation would result in a change to our fair value measurement.

Other financial instruments not measured at fair value on the Company's unaudited condensed consolidated balance sheets at June 30, 2023 and December 31, 2022, but which require disclosure of their fair values include: cash, restricted cash, accounts receivable, trade accounts payable and accrued expenses. The Company believes that the estimated fair value of such instruments at June 30, 2023 and December 31, 2022 approximates their carrying value as reported on the unaudited condensed consolidated balance sheets due to the relative short maturity of these instruments. See Note 8 - Long-term Debt for fair value disclosures on our asset-backed line of credit and term loan debt under our syndicated credit agreement facilities.

NOTE 5 – INVENTORIES

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


	June 30, 2023		December 31, 2022
Finished goods	$	95,410	$	82,906
Work in process	9,540		18,486
Inventories	$	104,950	$	101,392

NOTE 6 – CONTRACT ASSETS AND LIABILITIES

Under our customized pump production and 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 presented as "Costs and estimated profits in excess of billings". 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 unaudited condensed consolidated balance sheets.

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


	June 30, 2023		December 31, 2022
Costs incurred on uncompleted contracts	$	97,872	$	70,329
Estimated profits, thereon	31,966		23,274
Total costs and estimated profits on uncompleted contracts	129,838		93,603
Less: billings to date	88,414		80,421
Net	$	41,424	$	13,182

Such amounts were included in the accompanying unaudited condensed consolidated balance sheets for June 30, 2023 and December 31, 2022 under the following captions (in thousands):


	June 30, 2023		December 31, 2022
Costs and estimated profits in excess of billings	$	46,770	$	23,588
Billings in excess of costs and estimated profits	(5,333)		(10,411)
Translation adjustment	(13)		5
Net	$	41,424	$	13,182

During the six months ended June 30, 2023, $10.0 million of the balances that were previously classified as contract liabilities at the beginning of the period were recognized in revenues. Contract asset and liability changes were primarily due to normal activity and timing differences between our performance and customer payments.

NOTE 7 – INCOME TAXES

Income tax expense during interim periods is based on our estimated annual effective income tax rate plus any discrete items, which are recorded in the period in which they occur. Our effective tax rate from continuing operations was a tax expense of 26.3 percent for the three months ended June 30, 2023 compared to a tax expense of 25.5 percent for the three months ended June 30, 2022. Compared to the U.S. statutory rate for the three months ended June 30, 2023, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions recorded for research and development tax credits 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 27.0 percent for the six months ended June 30, 2023 compared to a tax expense of 23.5 percent for the six months ended June 30, 2022. Compared to the U.S. statutory rate for the six months ended June 30, 2023, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions recorded for research and development tax credits and was partially offset by research and development tax credits and other tax credits. Compared to the U.S. statutory rate for the six months ended June 30, 2022, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses and uncertain tax positions for research and development tax credits 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.

NOTE 8 – LONG-TERM DEBT

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


	June 30, 2023				December 31, 2022
	Carrying Value (1)		Fair Value		Carrying Value (1)		Fair Value
ABL Revolver	$	—	$	—	$	—	$	—
Term Loan B	425,949		428,079		428,133		411,008
Total long-term debt	425,949		428,079		428,133		411,008
Less: current portion	(4,369)		(4,391)		(4,369)		(4,194)
Long-term debt less current maturities	$	421,580	$	423,688	$	423,764	$	406,814

(1) Carrying value amounts do not include unamortized debt issuance costs of $13.2 million and $14.6 million for June 30, 2023 and December 31, 2022, respectively.

Credit Agreements

On July 19, 2022, the Company entered into an Amended and Restated Loan and Security Agreement (the “ABL Credit Agreement”) that provided for a $135.0 million asset-backed revolving line of credit (the "ABL Revolver"). The ABL Credit Agreement amends and restates the Loan and Security Agreement dated as of August 29, 2017. Subject to the conditions set forth in the ABL Credit Agreement, the ABL Revolver may be increased by up to an aggregate of $50.0 million, in minimum increments of $10.0 million. The ABL Revolver matures on July 19, 2027. As of June 30, 2023, the Company had no borrowings outstanding under the ABL Revolver, and total borrowing capacity under the ABL Revolver was $132.3 million, net of the letters of credit outstanding.

On November 22, 2022, the Company entered into an amendment to its existing $330 million Senior Secured Term Loan (the "Term Loan Amendment"), borrowing an additional $105 million that was added to the existing $330 million Senior Secured Term Loan (the “Term Loan Agreement”). As of June 30, 2023 there was $425.9 million outstanding under the Term Loan Agreement.

The Term Loan Amendment amends and supplements the Term Loan Agreement, dated as of December 23, 2020, and provides for among other things, $105.0 million in new incremental commitments. The Term Loan Agreement and Term Loan Amendment amortizes in equal quarterly installments of 0.25 percent with the balance payable in December 2027 when the facility matures. Subject to securing additional lender commitments, the Term Loan Agreement allows for incremental increases in facility size up to an aggregate of $85.0 million, plus an additional amount such that the Company's Secured Leverage Ratio (as defined in the Term Loan Agreement) would not exceed 3.75 to 1.00. Interest accrues on the Term Loan at a rate equal to SOFR plus a margin of 5.25 percent for the SOFR Loans (as defined in the Term Loan Amendment). We are required to repay the Term Loan with certain asset sales and insurance proceeds, certain debt proceeds and 50 percent of excess cash flow--reducing to (i.) 25 percent if our total leverage ratio is no more than 3.00 to 1.00 and (ii.) zero percent if our total leverage ratio is no more than 2.50 to 1.00.

The Company was in compliance with all financial covenants under the ABL Credit Agreement and Term Loan Agreements as of June 30, 2023.

NOTE 9 - EARNINGS PER SHARE

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Basic earnings per share:
Weighted average shares outstanding	17,211		18,766		17,402		18,651
Net income attributable to DXP Enterprises, Inc.	$	19,054	$	14,433	$	36,634	$	27,074
Convertible preferred stock dividend	22		22		45		45
Net income attributable to common shareholders	$	19,032	$	14,411	$	36,589	$	27,029
Per share amount	$	1.11	$	0.77	$	2.10	$	1.45

Diluted earnings per share:
Weighted average shares outstanding	17,211		18,766		17,402		18,651
Assumed conversion of convertible preferred stock	840		840		840		840
Total dilutive shares	18,051		19,606		18,242		19,491
Net income attributable to common shareholders	$	19,032	$	14,411	$	36,589	$	27,029
Convertible preferred stock dividend	22		22		45		45
Net income attributable to DXP Enterprises, Inc.	$	19,054	$	14,433	$	36,634

SEC Form 10-Q filed by DXP Enterprises Inc.