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RESTATEMENT | 12 Months Ended
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Dec. 31, 2020
Accounting Changes and Error Corrections [Abstract] |
RESTATEMENT | RESTATEMENT The Company has restated its consolidated balance sheet at December 31, 2020 and 2019, and consolidated statements of earnings, cash flows, and comprehensive income and retained earnings 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. The restated amounts for these quarters and the comparable interim periods in 2019 and 2018 are presented in “Note 23. Selected Quarterly Financial Data (Unaudited),” below. The restatement corrects errors resulting from the failure to timely clear aged payables resulting from the Company's three-way match process discrepancies and the recognition of true-up consideration in business combination accounting, 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 years ended December 31, 2020, 2019 and 2018, each of which is an “error” within the meaning of ASC Topic 250: Accounting Changes and Error Corrections The following table presents the impact of the restatement adjustments described below on net income and comprehensive income for the years ended December 31, 2020, 2019 and 2018 and retained earnings as of January 1, 2018:
|  |  |  |  |  |  |  |  | Retained Earnings
|  |  | Year Ended December 31, |  | as of
|  |  | 2020 |  | 2019 |  | 2018 |  | Jan.1, 2018
As reported | Net Income (As reported) |  | $ | (29,074) |  |  | $ | 35,775 |  |  | $ | 35,521 |  |  | $ | 134,193 |
| Unvouchered Purchase Orders |  | (1,874) |  |  | 3,737 |  |  | 2,411 |  |  | 7,818 |
| Landed cost inventory adjustment |  | (1,366) |  |  | 623 |  |  | 525 |  |  | 218 |
| Obsolete inventory reserve adjustments |  | 1,160 |  |  | (1,160) |  |  | — |  |  | — |
| Direct shipment cut off adjustment |  | 7 |  |  | (635) |  |  | 699 |  |  | 390 |
| Cut-off for credit card payment accruals |  | 581 |  |  | (581) |  |  | — |  |  | — |
| Sales tax payable accruals |  | 694 |  |  | (694) |  |  | — |  |  | — |
| Provision for income taxes |  | 255 |  |  | (300) |  |  | (922) |  |  | (2,145) |
Net | Net Income (Restated) |  | $ | (29,617) |  |  | $ | 36,765 |  |  | $ | 38,234 |  |  | $ | 140,474 |
| Cumulative translation adjustment, net of taxes |  | 1,941 |  |  | (687) |  |  | 224 |  |  |
| Comprehensive income (loss) as restated |  | $ | (27,676) |  |  | $ | 36,078 |  |  | $ | 38,458 |  |  |
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. Slow moving and obsolete inventory reserve The Company determined it had not appropriately adjusted its inventory reserve on an item-by-item basis for items that moved from obsolete to slow moving or vice versa. 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 $10.2 million as of December 31, 2018, a further reduction of $13.9 million as of December 31, 2019 and a net decrease 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 cash equivalents upon closing. In addition, cumulative translation adjustment was also reduced by $1.8 million as the 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 2020, 2019 and 2018 results on a condensed basis:
| For the Year Ended December 31,
| 2020 |  | 2019 |  | 2018
| As Reported | As Restated |  | As Reported | As Restated |  | As Reported | As Restated
STATEMENT(S) OF INCOME |  |  |  |  |  |  |
Sales | $ | 1,005,266 |  | $ | 1,005,266 |  |  | $ | 1,267,189 |  | $ | 1,264,851 |  |  | $ | 1,216,197 |  | $ | 1,218,709 |
Cost of sales | 725,997 |  | 728,070 |  |  | 919,965 |  | 915,062 |  |  | 883,989 |  | 882,866 |
Gross profit | 279,269 |  | 277,196 |  |  | 347,224 |  | 349,789 |  |  | 332,208 |  | 335,843 |
Selling, general and administrative costs | 246,256 |  | 244,981 |  |  | 281,102 |  | 282,377 |  |  | 263,757 |  | 263,757 |
Income (loss) before income taxes | (47,515) |  | (48,313) |  |  | 46,669 |  | 47,959 |  |  | 48,706 |  | 52,341 |
Provision (benefit) for income taxes | (18,441) |  | (18,696) |  |  | 10,894 |  | 11,194 |  |  | 13,185 |  | 14,107 |
Net (loss) income attributable to common shareholders | $ | (28,816) |  | $ | (29,359) |  |  | $ | 35,945 |  | $ | 36,935 |  |  | $ | 35,542 |  | $ | 38,255 |
Basic earnings (loss) per share | $ | (1.62) |  | $ | (1.65) |  |  | $ | 2.04 |  | $ | 2.10 |  |  | $ | 2.02 |  | $ | 2.18 |
Diluted earnings (loss) per share | $ | (1.62) |  | $ | (1.65) |  |  | $ | 1.96 |  | $ | 2.01 |  |  | $ | 1.94 |  | $ | 2.08 |
| As of December 31,
| 2020 |  | 2019 |  | 2018
| As Reported | As Restated |  | As Reported | As Restated |  | As Reported | As Restated
BALANCE SHEET: |  |  |  |  |  |
Cash and cash equivalents | $ | 117,444 |  | $ | 119,419 |  |  | $ | 54,327 |  | $ | 54,327 |  |  | $ | 40,519 |  | $ | 40,519 |
Accounts Receivable | 163,429 |  | 166,941 |  |  | 187,116 |  | 188,774 |  |  | 191,829 |  | 195,825 |
Inventory | 97,071 |  | 97,071 |  |  | 129,364 |  | 129,570 |  |  | 114,830 |  | 115,573 |
Federal income taxes receivable | 5,632 |  | 2,987 |  |  | 996 |  | — |  |  | 960 |  | — |
Goodwill | 248,339 |  | 261,767 |  |  | 194,052 |  | 194,052 |  |  | 194,052 |  | 194,052 |
Total Assets | 851,861 |  | 868,131 |  |  | 788,220 |  | 789,088 |  |  | 699,962 |  | 703,741 |
Accounts Payable | 75,744 |  | 64,849 |  |  | 76,438 |  | 63,676 |  |  | 87,407 |  | 80,085 |
Other current liabilities | 20,834 |  | 34,729 |  |  | 12,939 |  | 14,754 |  |  | 17,269 |  | 17,774 |
Federal income taxes payable | — |  | — |  |  | — |  | 2,101 |  |  | — |  | 1,602 |
Deferred Taxes | 1,777 |  | 1,777 |  |  | 9,872 |  | 9,602 |  |  | 8,633 |  | 8,633 |
Total Liabilities | $ | 503,995 |  | $ | 506,995 |  |  | $ | 443,272 |  | $ | 434,156 |  |  | $ | 391,708 |  | $ | 386,493 |
Accumulated Other Comprehensive Income | (21,842) |  | (18,013) |  |  | (19,954) |  | (19,954) |  |  | (19,267) |  | (19,267) |
Retained Earnings | 176,637 |  | 186,078 |  |  | 205,680 |  | 215,664 |  |  | 169,735 |  | 178,729 |
Equity | 347,866 |  | 361,136 |  |  | 344,948 |  | 354,932 |  |  | 308,254 |  | 317,248 |
Total Liabilities & Equity | $ | 851,861 |  | $ | 868,131 |  |  | $ | 788,220 |  | $ | 789,088 |  |  | $ | 699,962 |  | $ | 703,741 |
| Years ended December 31,
| 2020 | 2019 | 2018
| As Reported | As Restated | As Reported | As Restated | As Reported | As Restated
CONSOLIDATED STATEMENTS OF CASH FLOWS: |  |  |  |  |  |
CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |  |  |  |
Net income (loss) | $ | (29,074) |  | $ | (29,617) |  | $ | 35,775 |  | $ | 36,765 |  | $ | 35,521 |  | $ | 38,234 |
Reconciliation of net income (loss) to net cash provided by operating activities: |  |  |  |  |  |
Deferred income taxes | (14,771) |  | (14,732) |  | 1,110 |  | 840 |  | $ | 1,004 |  | $ | 1,004 |
Changes in operating assets and liabilities |  |  |  |  |  |
Trade accounts receivable | 42,909 |  | 44,884 |  | 5,560 |  | 7,898 |  | (22,487) |  | (24,999) |
Inventories | 22,208 |  | 22,414 |  | (14,447) |  | (13,910) |  | (20,838) |  | (21,363) |
Prepaid expenses and other assets | 13,053 |  | 13,782 |  | 5,110 |  | 5,110 |  | 188 |  | 187 |
Accounts payable and accrued expenses | (14,897) |  | (15,345) |  | (15,408) |  | (19,003) |  | 7,093 |  | 7,418 |
Other long-term liabilities | (8,870) |  | (8,853) |  | (6,718) |  | (6,718) |  | 2,610 |  | 2,610 |
Net cash provided by operating activities | $ | 107,675 |  | $ | 109,650 |  | $ | 41,306 |  | $ | 41,306 |  | $ | 35,840 |  | 35,840 |

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- Definition The entire disclosure for reporting accounting changes and error corrections. It includes the conveyance of information necessary for a user of the Company's financial information to understand all aspects and required disclosure information concerning all changes and error corrections reported in the Company's financial statements for the period. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=109234566&loc=d3e22644-107794 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -URI http://asc.fasb.org/topic&trid=2122394 + Details
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