DXP ENTERPRISES INC

NOTE 7 –INCOME TAXES

The following table presents provision for income taxes (in thousands, except for effective tax rates):

We are subject to income taxes in the U.S. and foreign jurisdictions. Significant judgment is required in determining our provision for income taxes and evaluating our uncertain tax positions. The effective tax rate increased primarily due to discrete items, including updates to the tax reserves, which reflect our ongoing assessment of uncertain tax positions, including research and development tax credits for which we believe our position is supportable and intend to dispute any proposed IRS adjustments, a decrease in tax benefits related to stock-based compensation vested during the period, net of amounts limited by Section 162(m), and an increase in non-deductible expenses.

While we believe that we have adequately provided for all uncertain tax positions, or tax positions where we believe it is not more-likely-than-not that the position will be sustained upon review, amounts asserted by tax authorities could be greater or less than our accrued position. Accordingly, our provisions on federal, state, and foreign tax related matters to be recorded in the future may change as revised estimates are made or the underlying matters are settled or otherwise resolved with the respective tax authorities.

The Organization of Economic Cooperation and Development (“OECD”) continues to release additional guidance, including administrative guidance on how Pillar Two rules should be interpreted and applied by jurisdictions as they adopt Pillar Two. A number of countries have utilized the administrative guidance as a starting point for legislation that went into effect January 1, 2024. As of June 30, 2026, the impact of Pillar Two is expected to be immaterial to the Company based on current legislation enacted to date.

NOTE 8 –LONG-TERM DEBT

Long-term debt consisted of the following (in thousands):

Senior Secured Term Loan B:

On December 16, 2025, the Company entered into an amendment (the “Term Loan Amendment”), by and among the Company, certain of the Company’s subsidiaries, as guarantors (the “Guarantors”), the incremental lenders party thereto and Goldman Sachs Bank USA as agent (the “Agent”).

The Term Loan Amendment amends and supplements the Term Loan and Security Agreement, dated as of December 23, 2020, by and among the Company, the Guarantors, the lenders party thereto and the Agent (as amended by Amendment No. 1 and Joinder Agreement to Term Loan and Security Agreement, dated as of November 22, 2022, as further amended by Amendment No. 2 and Joinder Agreement to Term Loan and Security Agreement, dated as of October 13, 2023, and as further amended by Amendment No. 3 and Joinder Agreement to Term Loan and Security Agreement, dated as of October 3, 2024, the “Existing Term Loan Agreement”; the Existing Term Loan Agreement, as further amended by the Term Loan Amendment, the “Term Loan Agreement”).

The Term Loan Amendment provides for, among other things, (i) adjustments to certain financial ratio covenant compliance dates and (ii) $205.0 million in new incremental term loan commitments (the “2025 Incremental Term Loans”) under the Term Loan Agreement, such that after giving effect to the Term Loan Amendment, including the 2025 Incremental Term Loans, the Company has $848.0 million in outstanding borrowings under the Term Loan Agreement.

The Senior Secured Term Loan B amortizes in equal quarterly installments of 0.25 percent, with the remaining balance being payable on October 13, 2030, when the facility matures.

As of June 30, 2026 there was $841.6 million outstanding under the Senior Secured Term Loan B.

Interest rate

Quarterly interest payments accrue on outstanding borrowings under the Senior Secured Term Loan B at a rate equal to Term SOFR (with a floor of 1.00%) plus 3.25%, or base rate plus 2.25%. The Senior Secured Term Loan B is guaranteed by each of the Company’s direct and indirect material wholly owned subsidiaries, other than any of the Company’s Canadian subsidiaries and certain other excluded subsidiaries.

The interest rate for the Senior Secured Term Loan B was 6.89 percent and 7.17 percent as of June 30, 2026 and December 31, 2025, respectively.

Facility Size Increases

The Senior Secured Term Loan B allows for incremental increases in facility size up to an aggregate of $100 million.

Prepayments

We are required to repay the Senior Secured Term Loan B with the proceeds from certain asset sales, certain debt issuances, and certain insurance proceeds. In addition, on an annual basis, we are required to repay an amount equal to 50 percent of excess cash flow, as defined in the Senior Secured Term Loan B, reducing to 25 percent if our Total Leverage Ratio is less than or equal to 3.00 to 1.00. No payment of excess cash flow is required if the Total Leverage Ratio is less than or equal to 2.50 to 1.00.

Restrictive Covenants

The Company’s primary financial covenant under the Senior Secured Term Loan B is a Secured Leverage Ratio. The Senior Secured Term Loan B Agreement requires that the Company’s Secured Leverage Ratio as of June 30, 2026 to be less than 5.75 to 1.00.

As of June 30, 2026, the Company’s Secured Leverage Ratio was 2.30 to 1.00.

ABL Revolver:

On July 1, 2025, the Company entered into an Increase Agreement (the “Increase Agreement”) to which the aggregate commitments under the Company's existing asset-based revolving credit facility (the "ABL Facility") were increased by $50 million. Following the effectiveness of the Increase Agreement, the total commitments under the ABL Facility increased from $135.0 million to $185.0 million. Subject to the conditions set forth in the ABL Credit Agreement, the ABL Revolver may be increased in increments of $10.0 million up to an aggregate of $50.0 million. The ABL Revolver matures on July 19, 2027. Interest accrues on outstanding borrowings at a rate equal to Secured Overnight Financing Rate (“SOFR”) or Canadian Dollar Offered Rate (“CDOR”) plus a margin ranging from 1.25 percent to 1.75 percent per annum, or at an alternate base rate, Canadian prime rate or Canadian base rate plus a margin ranging from 0.25 percent to 0.75 percent per annum, in each case, based upon the average daily excess availability under the ABL Revolver for the most recently completed calendar quarter. Fees payable on the unused portion of the facility range from 0.25 percent to 0.375 percent per annum. At June 30, 2026 the unused line fee was 0.375 percent and there wereno amounts outstanding under the ABL Revolver.

On July 2, 2026, the Company entered into a Second Amended and Restated Loan and Security Agreement (the “Second A&R Credit Agreement”). The ABL Credit Agreement provides for asset-based revolving loans (the “ABL Loans”) in an aggregate principal amount of up to $225.0 million. The ABL Credit Agreement amends and restates the Amended and Restated Loan and Security Agreement dated as of July 19, 2022. The ABL Facility will mature on July 2, 2031. For further discussion refer to Note 17. Subsequent Events.

Guarantees

Each of our current and future wholly owned material U.S. subsidiaries and DXP Enterprises, Inc. guarantees the obligations of our borrower under the ABL Revolver. Additionally, each of our Canadian subsidiaries guarantees the obligations of our Canadian borrower subsidiaries under the ABL Revolver.

Security

Obligations under the U.S. Borrowing Base are primarily secured, subject to certain exceptions, by a first-priority secure interest in the accounts receivable, inventory and related assets of our wholly owned, material U.S. subsidiaries. The security interest in accounts receivable, inventory, and related assets of the U.S. borrower subsidiaries ranks prior to the security interest in this collateral which secures the Term Loan B. The obligations under the Canadian Borrowing Base are primarily secured, subject to certain exceptions, by a first-priority secure interest in the accounts receivable, inventory and related assets of our wholly owned, material Canadian subsidiaries and our wholly owned material U.S. subsidiaries.

Excess Availability

The borrowing availability under our credit facility was $147.9 million and $153.5 million at June 30, 2026 and December 31, 2025, respectively.

Interest rate

The interest rate for the ABL Revolver was 7.00 percent and 7.00 percent as of June 30, 2026 and December 31, 2025, respectively.

Financial Covenant

The Company's principal financial covenant under the ABL Credit Agreement include a Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio under the ABL Credit Agreement is defined as the ratio for the most recently completed four-fiscal quarter period, of (a) EBITDA minus capital expenditures (excluding those financed or funded with debt (other than the ABL Loans), (ii) the portion thereof funded with the net proceeds from asset dispositions of equipment or real property which the Company is permitted to reinvest pursuant to the Term Loan and the portion thereof funded with the net proceeds of casualty insurance or condemnation awards in respect of any equipment and real estate which DXP is not required to use to prepay the ABL Loans pursuant to the Term Loan B Agreement or with the proceeds of casualty insurance or condemnation awards in respect of any other property) minus cash taxes paid (net of cash tax refunds received during such period), to (b) fixed charges. The Company is restricted from allowing its fixed charge coverage ratio to be less than 1.00 to 1.00 during a compliance period, which is triggered when the availability under the ABL Revolver falls below a threshold set forth in the ABL Credit Agreement. As of June 30, 2026, the Company's Fixed Charge Coverage Ratio was 2.97 to 1.00.

The Company was in compliance with all financial covenants as of June 30, 2026.

Promissory Note:

On November 1, 2024, in connection with an acquisition, the Company signed a promissory note for the loan amount of $1.0 million. The promissory note has a maturity date of November 1, 2029. The promissory note shall be payable infour equal consecutive annual installments of $0.1 million on November 1 of each year commencing on November 1, 2025, provided that all amounts outstanding under this promissory note, including all accrued and unpaid interest and other amounts payable under the promissory note, shall be due and payable in full on November 1, 2029. The Company may prepay the promissory note in

whole or in part at any time or from time to time without penalty or premium by paying the principal amount to be prepaid together with accrued interest thereon to the date of the prepayment. Interest is payable quarterly, starting with the quarter ending January 31, 2025 on outstanding borrowings at a rate of 5%.

Maturities of Debt

As of June 30, 2026, the maturities of long-term debt for the next five years were as follows (in thousands):

Interest Expense:

During the three and six months ended June 30, 2026, the Company incurred total interest expense of $16.8 million and $33.3 million, respectively, of which $15.2 million and $30.2 million is related to interest on the asset-based credit facilities and the term loans. Debt issuance costs and discounts are amortized as interest expense over the life of the debt. Amortization expense related to debt issuance costs and discounts was $1.1 million and $2.3 million for the three and six months ended June 30, 2026, respectively. The remaining $0.4 million and $0.8 million of interest expense is primarily related to interest attributable to finance leases for the three and six months ended June 30, 2026, respectively.

During the three and six months ended June 30, 2025, the Company incurred total interest expense of $14.7 million and $29.4 million, respectively, of which $13.4 million and $26.8 million related to interest on the ABL Facility and the term loans, respectively. Debt issuance costs and discounts are amortized as interest expense over the life of the debt. Amortization expense related to debt issuance costs and discounts was $1.0 million and $1.9 million for the three and six months ended June 30, 2025, respectively. The remaining $0.3 million and $0.7 million of interest expense is primarily related to interest attributable to finance leases for the three and six months ended June 30, 2025, respectively.