DXP ENTERPRISES INC 10-Q

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management discussion and analysis ("MD&A") of the financial condition and results of operations of DXP Enterprises, Inc. together with its subsidiaries (collectively "DXP," "Company," "us," "we," or "our") for the three and six months ended June 30, 2021 should be read in conjunction with our previous Annual Report on Form 10-K/A and our Quarterly Reports on Form 10-Q, and the consolidated financial statements and notes thereto included in such reports. The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q (this "Report") contains statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements include without limitation those about the Company’s expectations regarding the impact of the COVID-19 pandemic and the impact of low commodity prices of oil and gas; the Company’s business, the Company’s future profitability, cash flow, liquidity, and growth. Such forward-looking statements can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "might", "estimates", "will", "should", "could", "would", "suspect", "potential", "current", "achieve", "plans" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. Any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and actual results may vary materially from those discussed in the forward-looking statements or historical performance as a result of various factors. These factors include the effectiveness of management's strategies and decisions, our ability to implement our internal growth and acquisition growth strategies, general economic and business conditions specific to our primary customers, changes in government regulations, our ability to effectively integrate businesses we may acquire, new or modified statutory or regulatory requirements, availability of materials and labor, inability to obtain or delay in obtaining government or third-party approvals and permits, non-performance by third parties of their contractual obligations, unforeseen hazards such as weather conditions, acts of war or terrorist acts and the governmental or military response thereto, cyber-attacks adversely affecting our operations, other geological, operating and economic considerations and declining prices and market conditions, including reduced oil and gas prices and supply or demand for maintenance, repair and operating products, equipment and service, decreases in oil and natural gas prices, decreases in oil and natural gas industry expenditure levels, which may result from decreased oil and natural gas prices or other factors, economic risks related to the impact of COVID-19, our ability to manage changes and the continued health or availability of management personnel, and our ability to obtain financing on favorable terms or amend our credit facilities, as needed. This Report identifies other factors that could cause such differences. We cannot assure that these are all of the factors that could cause actual results to vary materially from the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in "Risk Factors", in our Annual Report on Form 10-K/A filed with the Securities and Exchange Commission on October 22, 2021. We assume no obligation and do not intend to update these forward-looking statements. Unless the context otherwise requires, references in this Report to the "Company", "DXP", "we" or "our" shall mean DXP Enterprises, Inc., a Texas corporation, together with its subsidiaries. CURRENT MARKET CONDITIONS AND OUTLOOK General DXP Enterprises, Inc. is a business-to-business distributor of maintenance, repair and operating and production ("MROP") products and services to a variety of customers in different end markets primarily across North America. Additionally, we fabricate, remanufacture and assemble custom pump packages along with manufacturing branded private label pumps. COVID-19 Pandemic Impact The pandemic continued to have a significant impact on our business for the six months ended June 30, 2021. The marketplace broadly, and the Company specifically, continued to operate with certain modifications to balance re-opening with employee and customer safety. However, most of the markets in which we operate continued to normalize and re-open. This improved the outlook of the manufacturing and industrial customers that support our traditional branch and onsite business. Although the rate of improvement remains gradual and the overall activity level remains below pre-pandemic levels, DXP is seeing a modest improvement from monthly lows experienced in July of 2020. The COVID-19 pandemic caused significant disruptions in the U.S. and global markets, and the full extent of the impacts is still unknown and will depend on a number of developments, including any continued spread of the virus and its variants, the availability of and use of vaccines, and the impact of governmental measures to combat the spread of the virus (such as mask mandates or social distancing requirements) and to promote economic stability and recovery. The initial recovery from the 17 COVID-19 pandemic has been accompanied by a resurgence in demand as industries re-open, which is currently straining global supply chains, raw material and labor availability, and transportation efficiency. DXP’s businesses and its major facilities have remained operational during the pandemic as customers relied on DXP’s products and services to keep their businesses up and running. While the COVID-19 pandemic continues to impact global markets and the needs of customers, employees, suppliers and communities continue to change, the Company’s efforts and business plans will evolve accordingly. DXP is focused on serving customers and communities in addressing the pandemic and providing products to assist in the ongoing recovery, supporting the needs and safety of employees and ensuring the Company continues to operate with a strong financial position. As more vaccine is distributed and mask mandates evolve, the Company continues to monitor and refine its product assortment and actions to support customers’ return to regular operations.The COVID-19 pandemic has impacted and is likely to continue impacting our businesses and operations as well as the operations of our customers and suppliers. From a customer perspective, business re-openings, production and related activity throughout the quarter varied based on geography, industry and regional COVID-19 pandemic conditions. The Company's major operational facilities and infrastructure (i.e. distribution centers, branches, and on-site logistic partners) are remaining operational with limited disruptions, while adhering to strict safety and social-distancing protocols. In addition, the Company has prioritized maintaining all facilities safe for customers and employees to work and interact. Many of our employees, depending on local conditions and regulations, have returned to a work-from-office environment, and we expect that trend to continue in the near term. As of the end of the second quarter of 2021, we have remained undrawn on our $135 million bank revolver; and it remains available for use in the event a need arises. In response to easing restrictions and the continued vaccination efforts, we continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, or local authorities or that we determine are in the best interests of our employees, customers, suppliers, and shareholders. While we are unable to determine or predict the nature, duration, or scope of the overall impact the COVID-19 pandemic will have on our business, results of operations, liquidity, or capital resources, we believe that we have remained nimble and are poised to remain opportunistic during the recovery. Matters Affecting Comparability There were 63 business days in the three months ended June 30, 2021 and June 30, 2020. There were 126 business days in the six months ended June 30, 2021 and 127 business days in the six months ended June 30, 2020. Outlook Service Centers & Supply Chain Services Segments The replacement and mission-critical nature of our products and services within the Company's Service Centers and Supply Chain Services business segments and industrial and manufacturing environments and processes drives a demand and outlook that are correlated with global, national and regional industrial production, capacity utilization and long-term GDP growth. Economic conditions remain uncertain with regard to COVID-19, and its impact on various end markets, however, recent order activity has begun to improve as markets strengthened and gained greater visibility to vaccine roll-out strategies in various regions. In the second quarter of 2021, we had approximately $249.0 million in sales in our Service Centers and Supply Chain Services segment, an increase of approximately 30.4 percent over the the second quarter of 2020. While the Company continues to expect choppiness as the economy gradually gains confidence with COVID-19 vaccines, we expect financial results to continually improve with interim periods of potential setback. Innovative Pumping Solutions Segment To date, the Company's Innovative Pumping Solutions segment has been able to absorb the pandemic with small workforce reductions or furloughs, which positions the Company for accelerated growth once recovery is clear within Innovative Pumping Solutions. The oil and gas industry continues to be impacted by the COVID-19 pandemic, along with other industry specific factors including environmental concerns and issues. In the first half of 2021, we began to see an improvement in the demand for oil and natural gas as the roll out of the COVID-19 vaccinations gradually improved around the globe and pandemic restrictions eased. The increasing optimism related to demand recovery has led to higher commodity prices and although demand levels remain below pre-pandemic levels, there is growing confidence of returning to 2019 levels in the coming years. Also, contributing to the improvement in oil prices has been cooperation within OPEC to implement production cuts over the last year; however, it was recently announced that OPEC intends to increase production beginning in August 2021, that will continue into late 2022 to match increasing demand expectations. Demand recovery could still possibly slow or pause as a result of additional waves of pandemic outbreak or heightened pandemic control measures. Over the longer term, we could also experience a structural shift in the global economy and its demand for oil and natural gas as a result of changes in the way people work, travel and interact. 18 RESULTS OF OPERATIONS (in thousands, except percentages and per share data) DXP is organized into three business segments: Service Centers ("SC"), Supply Chain Services ("SCS") and Innovative Pumping Solutions ("IPS"). The Service Centers are engaged in providing maintenance, repair and operating ("MRO") products, equipment and integrated services, including technical expertise and logistics capabilities, to industrial customers with the ability to provide same day delivery. The Service Centers provide a wide range of MRO products and services in the rotating equipment, bearing, power transmission, hose, fluid power, metal working, industrial supply and safety product and service categories. The SCS segment provides a wide range of MRO products and manages all or part of our customer's supply chain function, and inventory management. The IPS segment fabricates and assembles integrated pump system packages custom made to customer specifications, remanufactures pumps and manufactures branded private label pumps. Three Months Ended June 30, 2021 % 2020 % (Restated) Sales $ 285,691 100.0 % $ 251,401 100.0 % Cost of sales 200,413 70.2 % 181,320 72.1 % Gross profit $ 85,278 29.8 % $ 70,081 27.9 % Selling, general and administrative expenses 70,432 24.7 % 62,943 25.0 % Income from operations $ 14,846 5.2 % $ 7,138 2.8 % Other (income) expense, net (105) — % 133 0.1 % Interest expense 5,337 1.9 % 3,930 1.6 % Income before income taxes $ 9,614 3.4 % $ 3,075 1.2 % Provision for income taxes 1,684 0.6 % 710 0.3 % Net income $ 7,930 2.8 % $ 2,365 0.9 % Net loss attributable to noncontrolling interest (189) — (62) — Net income attributable to DXP Enterprises, Inc. $ 8,119 2.8 % $ 2,427 1.0 % Per share amounts attributable to DXP Enterprises, Inc. Basic earnings per share 0.42 $ 0.14 Diluted earnings per share 0.41 $ 0.13 Three Months Ended June 30, 2021 compared to Three Months Ended June 30, 2020 SALES. Sales for the three months ended June 30, 2021 increased $34.3 million, or 13.6 percent, to approximately $285.7 million from $251.4 million for the prior year's corresponding period. Sales from businesses acquired in December 2020 and April 2021 accounted for $37.7 million of the sales for the three months ended June 30, 2021. This overall sales increase is the result of an increase in sales in our SC and SCS segments of $55.8 million and $2.3 million, partially offset by a decrease in sales of $23.8 million in our IPS segment. The fluctuations in sales are further explained in our business segment discussions below. Three Months Ended June 30, 2021 2020 Change Change% Sales by Business Segment (in thousands, except change %) Service Centers $ 209,633 $ 153,848 $ 55,785 36.3 % Innovative Pumping Solutions 36,727 60,479 (23,752) (39.3) % Supply Chain Services 39,331 37,074 2,257 6.1 % Total DXP Sales $ 285,691 $ 251,401 $ 34,290 13.6 % 19 Service Centers segment. Sales for the SC segment increased by approximately $55.8 million, or 36.3 percent for the three months ended June 30, 2021 compared to the prior year's corresponding period. Excluding $32.5 million of second quarter 2021 SC segment sales from businesses acquired in December 2020, Service Centers segment sales for the second quarter increased $23.3 million, or 15.1 percent from the prior year's corresponding period. This sales increase is primarily the result of increased sales of rotating equipment, metal working, and bearings and power transmission products to customers engaged in variety of markets compared due to the negative economic impacts of the COVID-19 pandemic on 2020 sales results. Innovative Pumping Solutions segment . Sales for the IPS segment decreased by $23.8 million, or 39.3 percent for the three months ended June 30, 2021 compared to the prior year's corresponding period. Excluding $5.2 million of second quarter 2021 IPS segment sales from a business acquired in April 2021, IPS segment sales for the second quarter decreased $28.9 million, or 47.8 percent from the prior year's corresponding period. This decrease was primarily the result of a decrease in the capital spending by oil and gas producers and related businesses stemming from a decrease in U.S. crude oil production previously announced due to the negative economic impacts of the COVID-19 pandemic. Supply Chain Services segment. Sales for the SCS segment increased by $2.3 million, or 6.1%, for the three months ended June 30, 2021, compared to the prior year's corresponding period. The improved sales is primarily related to increased sales to customers in the food & beverage, general manufacturing and aerospace industries, compared to the negative economic impacts of the COVID-19 pandemic on 2020 sales results. GROSS PROFIT. Gross profit as a percentage of sales for the three months ended June 30, 2021 increased by approximately 197 basis points from the prior year's corresponding period. Excluding the impact of the businesses acquired, gross profit as a percentage of sales increased by approximately 175 basis points. The increase in the gross profit percentage, excluding the businesses acquired, is primarily the result of an approximate a 253 basis point increase in the gross profit percentage in our SC segment, 19 basis point increase in the gross profit percentage in our IPS segment, and a 11 basis point decrease in the gross profit percentage in our SCS segment. Service Centers segment. As a percentage of sales, the second quarter gross profit percentage for the SC increased approximately 247 basis points. Adjusting for the businesses acquired, gross profit as a percentage of sales increased approximately 253 basis points from the prior year's corresponding period. This was primarily as a result of volume increases and product mix. Gross profit for the Service Centers segment, excluding businesses acquired, increased $11.1 million, or 25.4 percent, during the second quarter of 2021 compared to the prior year’s corresponding period. The increase in gross profit is primarily the result of the improvement in sales due to the items discussed above. Innovative Pumping Solutions segment. As a percentage of sales, the second quarter gross profit percentage for the IPS segment increased approximately 129 basis points. Adjusting for the business acquired, gross profit as a percentage of sales increased approximately 19 basis points from the prior year's corresponding period. The increase in gross profit percentage is primarily due to a mix shift (higher margin international work and domestic water and wastewater projects). Gross profit dollars decreased $8.2 million, excluding business acquired, primarily as a result of a decrease in utilization as a result of significantly reduced capital expenditure budgets by our customers associated with the negative economic impacts of the COVID-19 pandemic. Supply Chain Services segment. Gross profit as a percentage of sales for the SCS segment decreased approximately 11 basis points compared to the prior year's corresponding period. Gross profit for the second quarter of 2021 increased $0.5 million or 5.6% compared to the prior year's corresponding period, primarily the result of the improvement in sales due to the items discussed above. SELLING, GENERAL AND ADMINISTRATIVE ("SG&A"). Selling, general and administrative expense for the three months ended June 30, 2021 increased by approximately $7.5 million, or 11.9%, to $70.4 million from $62.9 million for the prior year's corresponding period. Selling, general and administrative expense from businesses acquired accounted for $6.0 million. Excluding expenses from businesses acquired, SG&A for the quarter increased by $1.5 million, or 2.3%. The increase in SG&A excluding businesses acquired is primarily the result of increased payroll, incentive compensation and related taxes and 401(k) expenses as a result of increased business activity associated with recovery from the negative economic impacts of the COVID-19 pandemic. OPERATING INCOME. Operating income for the second quarter of 2021 increased by $7.7 million to $14.8 million, from $7.1 million in the prior year's corresponding period. This increase in operating income is primarily related to the above mentioned increase in sales and profitability with SC and IPS. 20 INTEREST EXPENSE. Interest expense for the second quarter of 2021 increased $1.4 million compared with the prior year's corresponding period primarily due to a higher principal balance for the three months ended June 30, 2021 compared to the prior year's corresponding period as a result of the Company entering into a new term loan in December 2020. This was partially offset by lower LIBOR rates for the three months ended June 30, 2021. INCOME TAXES. Our effective tax rate from continuing operations was a tax expense of 17.4 percent for the three months ended June 30, 2021 compared to a tax expense of 23.1 percent for the three months ended June 30, 2020. Compared to the U.S. statutory rate for the three months ended June 30, 2020, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions which required an increase in reserves. The effective tax rate was partially offset by research and development tax credits and other tax credits. Six Months Ended June 30, 2021 % 2020 % (Restated) Sales $ 531,278 100.0 % $ 552,384 100.0 % Cost of sales 374,370 70.5 % 399,189 72.3 % Gross profit $ 156,908 29.5 % $ 153,195 27.7 % Selling, general and administrative expenses 135,829 25.6 % 134,738 24.4 % Income from operations $ 21,079 4.0 % $ 18,457 3.3 % Other (income) expense, net (535) (0.1) % (701) (0.1) % Interest expense 10,580 2.0 % 8,307 1.5 % Income before income taxes $ 11,034 2.1 % $ 10,851 2.0 % Provision for income taxes 2,945 0.6 % 2,496 0.5 % Net income $ 8,089 1.5 % $ 8,355 1.5 % Net loss attributable to noncontrolling interest (401) — (124) — % Net income attributable to DXP Enterprises, Inc. $ 8,490 1.6 % $ 8,479 1.5 % Per share amounts attributable to DXP Enterprises, Inc. Basic earnings per share $ 0.44 $ 0.48 Diluted earnings per share $ 0.42 $ 0.45 Six Months Ended June 30, 2021 compared to Six Months Ended June 30, 2020 SALES. Sales for the six months ended June 30, 2021 decreased $21.1 million, or 3.8 percent, to approximately $531.3 million from $552.4 million for the prior year's corresponding period. Sales from businesses acquired since December 2020 accounted for $66.1 million of the sales for the six months ended June 30, 2021. This sales decrease is the result of a decrease in sales in our IPS and SCS segments of $70.5 million, and $10.1 million. This was partially offset by an increase of $59.6 million in SC. The fluctuations in sales are further explained in our business segment discussions below. Six Months Ended June 30, 2021 2020 Change Change% Sales by Business Segment (in thousands, except change%) Service Centers 396,002 336,433 $ 59,569 17.7 % Innovative Pumping Solutions 59,972 130,500 (70,528) (54.0) % Supply Chain Services 75,304 85,451 (10,147) (11.9) % Total DXP Sales $ 531,278 $ 552,384 $ (21,106) (3.8) % Service Centers segment. Sales for the SC segment increased by $59.6 million, or 17.7 percent for the six months ended June 30, 2021 compared to the prior year's corresponding period. Excluding $60.9 million of Service Center segment sales for the six months ended June 30, 2021 from businesses acquired, SC segment sales decreased $1.4 million, or 0.4 percent from the prior year's corresponding period. This sales decrease is primarily the result of decreased sales of metal working, safety services and bearings to customers engaged in the OEM oil and gas markets in connection with decreased capital spending by oil and gas producers. 21 Innovative Pumping Solutions segment . Sales for the IPS segment decreased by $70.5 million, or 54.0 percent for the six months ended June 30, 2021 compared to the prior year's corresponding period. Excluding $5.2 million of IPS segment sales for the six months ended June 30, 2021 from a business acquired, IPS segment sales decreased $75.7 million, or 58.0 percent from the prior year's corresponding period. This decrease was primarily the result of a decrease in the capital spending by oil and gas producers and related businesses stemming from a decrease in U.S. crude oil production due to low crude prices and the economic impacts of COVID-19. The current level of IPS sales activity could continue during the remainder of 2021. Supply Chain Services segment. Sales for the SCS segment decreased by $10.1 million, or 11.9 percent, for the six months ended June 30, 2021, compared to the prior year's corresponding period. The decline in sales is primarily related to decreased sales to customers in the aerospace and oil and gas industries due to the economic impacts of the COVID-19 pandemic. GROSS PROFIT. Gross profit as a percentage of sales for the six months ended June 30, 2021 increased by approximately 180 basis points from the prior year's corresponding period. Excluding the impact of the businesses acquired, gross profit as a percentage of sales increased by approximately 158 basis points. The increase in the gross profit percentage is primarily the result of an approximate 270 basis point increase in the gross profit percentage in our IPS segment, and a 182 basis point increase in the gross profit percentage in our SC segment, excluding businesses acquired. Additionally, a 20 basis point increase in the gross profit percentage in our SCS segment contributed to the increase. Service Centers segment. As a percentage of sales, the six months ended June 30, 2021 gross profit percentage for the Service Centers increased approximately 187 basis points from the prior year's corresponding period. This was primarily the result of increased sales of rotating equipment and bearings and power transmission products to customers engaged in non-oil and gas markets. Innovative Pumping Solutions segment. As a percentage of sales, the six months ended June 30, 2021 gross profit percentage for the IPS segment increased approximately 314 basis points from the prior year's corresponding period. The increase in gross profit percentage is primarily due to a mix shift (higher margin international work and domestic water and wastewater projects) as well as the shipment of negative gross profit percentage work completing in 2020. Gross profit dollars decreased $18.4 million, primarily as a result of significantly reduced capital expenditure budgets by our customers associated with the negative economic impacts of the COVID-19 pandemic. Supply Chain Services segment. Gross profit as a percentage of sales increased approximately 20 basis points, compared to the prior year's corresponding period. Gross profit for the second quarter of 2021 decreased $2.2 million or 11.1 percent compared to the prior year's corresponding period, primarily the result of the decline in sales due to the items discussed above. SELLING, GENERAL AND ADMINISTRATIVE ("SG&A"). Selling, general and administrative expense for the six months ended June 30, 2021 decreased by approximately $1.1 million, or 0.8 percent, to $135.8 million from $134.7 million for the prior year's corresponding period. Selling, general and administrative expense from businesses acquired accounted for $10.9 million. Excluding expenses from businesses acquired, SG&A for the six months ended June 30, 2021 decreased by $9.8 million, or 7.3 percent. The decrease in SG&A excluding businesses acquired is the result of decreased payroll, incentive compensation and related taxes and 401(k) expenses as a result of decreased business activity and cost reduction actions associated with COVID-19 and depressed demand in oil and gas markets. OPERATING INCOME. Operating income for the six months ended June 30, 2021 increased by $2.6 million or 14.2% to $21.1 million from $18.5 million in the prior year's corresponding period. This increase in operating income is primarily related to the items discussed above. INTEREST EXPENSE. Interest expense for the six months ended June 30, 2021 increased $2.3 million compared with the prior year's corresponding period primarily due to a higher principal balance for the six months ended June 30, 2021 compared to the prior year's corresponding period as a result of the Company entering into a new term loan in December 2020 partially offset by lower LIBOR rates for the six months ended June 30, 2021. INCOME TAXES. Our effective tax rate from continuing operations was a tax expense of 26.7 percent for the six months ended June 30, 2021 compared to a tax expense of 23.0 percent for the six months ended June 30, 2020. Compared to the U.S. statutory rate for the six months ended June 30, 2020, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions which required an increase in reserves. The effective tax rate was partially offset by research and development tax credits and other tax credits.. 22 LIQUIDITY AND CAPITAL RESOURCES General Overview As of June 30, 2021, we had cash and restricted cash of $79.3 million and credit facility availability of $131.3 million. We have a $135.0 million asset-based loan facility, partially offset by letters of credit of $3.7 million, that is due to mature in August 2022, under which we had no borrowings outstanding as of June 30, 2021 and a Term Loan B with $328.4 million in borrowings. Our primary source of capital is cash flow from operations, supplemented as necessary by bank borrowings or other sources of financing. As a distributor of MRO products and services and fabricator of custom pumps and packages, working capital can fluctuate as a result of changes in inventory levels, accounts receivable and costs in excess of billings for project work. Additional cash is required for capital items for information technology, warehouse equipment, leasehold improvements, pump manufacturing equipment and safety services equipment. We also require cash to pay our lease obligations and to service our debt. The following table summarizes our net cash flows generated by or used in operating activities, net cash provided by or used in investing activities and net cash used in financing activities for the periods presented (in thousands) : Six Months Ended June 30, 2021 2020 Net Cash Provided by (Used in): Operating Activities $ 16,206 $ 61,764 Investing Activities (44,664) (19,163) Financing Activities (12,004) (17,133) Effect of Foreign Currency 303 (1,025) Net Change in Cash $ (40,159) $ 24,443 Operating Activities The Company generated $16.2 million of cash in operating activities during the six months ended June 30, 2021 compared to $61.8 million of cash generated during the prior year's corresponding period. The $45.6 million decrease in the amount of cash provided between the two periods was primarily driven by the increase in accounts receivables associated with trade accounts receivables from recent acquisitions without comparable activity in 2020 and increased business activity in 2021. Investing Activities For the six months ended June 30, 2021, net cash used in investing activities was $44.7 million compared to $19.2 million use of cash during the prior year’s corresponding period. This $25.5 million increase was primarily driven by the purchase of CVI in the second quarter of 2021. For the six months ended June 30, 2021, purchases of property and equipment decreased to approximately $1.5 million compared to $5.1 million in 2020 primarily due to reduced capital spending as a result of company-wide cost cutting measures in response to the COVID-19 pandemic. The current year also benefited from the sale of a corporate asset totaling $1.3 million. 23 Financing Activities For the six months ended June 30, 2021, net cash used in financing activities was $12.0 million, compared to net cash used in financing activities of $17.1 million during the prior year’s corresponding period. The activity in the period was primarily attributed to Term Loan B required principal payments of $1.7 million in 2021 compared to $16.3 million in required principal and optional prepayments in 2020. This was partially offset by share purchases in 2021 of $8.8 million with no comparable activity in 2020. On May 12, 2021, the Company announced that its Board of Directors authorized a share repurchase program (the “program”) under which up to $85.0 million or 1.5 million shares of its outstanding common stock may be acquired in the open market over the next 24 months at the discretion of management. During the six months ended June 30, 2021 we purchased 1.0 million shares for $29.2 million. Such consideration was funded with existing cash balances and an agreement to pay sellers over four equal installments beginning on June 15, 2021. The remaining three installments of $20.4 million were included in other current liabilities as of June 30, 2021. We believe this is adequate funding to support working capital needs within the business. Funding Commitments We intend to pursue additional acquisition targets, but the timing, size or success of any acquisition and the related potential capital commitments cannot be determined with certainty. We continue to expect to fund future acquisitions primarily with cash flows from operations and borrowings, including the undrawn portion of the credit facility or new debt issuances, but may also issue additional equity either directly or in connection with acquisitions. There can be no assurance that additional financing for acquisitions will be available at terms acceptable to the Company. The Company believes cash generated from operations will meet normal working capital needs during the next twelve months. However, the Company may require additional debt outside of our credit facilities or equity financing to fund potential acquisitions. Such additional financings may include additional bank debt or the public or private sale of debt or equity securities. In connection with any such financing, the Company may issue securities that dilute the interests of our shareholders. DISCUSSION OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES Critical accounting and business policies are those that are both most important to the portrayal of a company's financial position and results of operations, and require management's subjective or complex judgments. These policies have been discussed with the Audit Committee of the Board of Directors of DXP. The Company's condensed financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). The accompanying Condensed Consolidated Financial Statements include the accounts of the Company, its wholly owned subsidiaries and its variable interest entity ("VIE"). The accompanying unaudited Condensed Consolidated Financial Statements have been prepared on substantially the same basis as our annual Consolidated Financial Statements and should be read in conjunction with our annual report on Form 10-K/A for the year ended December 31, 2020. For a more complete discussion of our significant accounting policies and business practices, refer to the consolidated annual report on Form 10-K/A filed with the Securities and Exchange Commission on October 22, 2021. The results of operations for the six months ended June 30, 2021 are not necessarily indicative of results expected for the full fiscal year. RECENT ACCOUNTING PRONOUNCEMENTS See Note 3 - Recent Accounting Pronouncements to the Condensed Consolidated Financial Statements for information regarding recent accounting pronouncements. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. For quantitative and qualitative disclosures about market risk, see Item 7A, 'Quantitative and Qualitative Disclosures About Market Risk,' of our Annual Report on Form 10-K/A for the year ended December 31, 2020. Our exposures to market risk have not changed materially since December 31, 2020. 24