Company: DXPE
Filing Date: 2025-03-10
Form Type: 10-K
Source: 0001020710-25-000036
Chunk: 71

Company: DXP ENTERPRISES INC
Filing Date: 2025-03-10
Form: 10-K
Item: Item 8
Chunk 71
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 million and $3.4 million for the periods ending December 31, 2024 and December 31, 2023, respectively.Quantitative Information about Level 3 Fair Value MeasurementsThe significant unobservable inputs used in the fair value measurement of the Company's contingent consideration liabilities designated as Level 3 are as follows:Fair Value at December 31, 2024Valuation TechniqueSignificant Unobservable Inputs$16,322 Discounted cash flowAnnualized EBITDA and probability of achievementSensitivity to Changes in Significant Unobservable InputsThe significant Level 3 unobservable inputs used in the fair value measurement of contingent consideration related to the acquisitions 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 calculation was 9.8%. A decrease in discount rates would increase the contingent consideration liability, whereas an increase or decrease in EBITDA forecasts would increase or decrease the contingent liability. Changes in our unobservable inputs in isolation would result in a change to our fair value measurement. As of December 31, 2024, the maximum amount of contingent consideration payable under these arrangements is $18.7 million over three years.Other financial instruments not measured at fair value on the Company's consolidated balance sheets at December 31, 2024 and December 31, 2023, 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 December 31, 2024 and December 31, 2023 approximates their carrying value as reported on the consolidated balance sheets due to the relative short maturity of these instruments.

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See Note 9 - 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 6 – CONTRACT ASSETS AND LIABILITIES

Under our customized pump production contracts, 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 “Cost and estimated profits in excess of billings” on our 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