Company: DXPE
Filing Date: 2025-08-07
Form Type: 10-Q
Source: 0001020710-25-000137
Chunk: 113

Company: DXP ENTERPRISES INC
Filing Date: 2025-08-07
Form: 10-Q
Item: Part I, Item 8
Chunk 113
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 13a-15(e) of the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of June 30, 2025.

Our management, including our principal executive officer and principal financial officer, has concluded that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with GAAP for each of the periods presented.

Changes in Internal Control Over Financial Reporting

There were no changes in internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act identified in the evaluation for the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

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.

ITEM 1A. RISK FACTORS.

A reduction of our federal income tax research activities credits may have a material adverse effect on our business and financial condition.

The Company regularly claims federal income tax credits for the research activities it conducts related to its manufacturing activities.  The Company has recognized a total of $38.0 million as of the second quarter of 2025 in federal income tax credits for the research activities from 2015 thru 2025.  The Internal Revenue Service (“IRS”) is conducting an examination of the Company’s U.S. federal income tax returns for its 2018 tax year.  The Company received Notices of Proposed Adjustment in October 2024, which if sustained, would result in a loss of federal income tax credits for research activities claimed by the Company during that tax year. The Company intends to vigorously defend its reported positions. The Company has currently accrued a reserve relating to the potential tax adjustments. However, the outcome of this dispute involves a number of uncertainties, including those relating to the application of the Internal Revenue Code and other federal income tax authorities and judicial precedent. Accordingly, there can be no assurance that the dispute with the IRS will be resolved favor