What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-13 · 133 added, 65 removed, 128 unchanged (61% of the section changed)

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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 months ended March 31, 2022 should be read in conjunction with our previous Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q, and the consolidated financial statements and notes thereto included in such reports.

together with its subsidiaries (collectively "DXP," "Company," "us," "we," or "our") for the six months ended June 30, 2022 should be read in conjunction with our previous Annual Report on Form 10-K 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").

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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, the Ukrainian/Russia conflict and the impact on commodity prices;

These forward-looking statements include without limitation those about the Company’s expectations regarding the long-term impacts of the COVID-19 pandemic, the prolonged Ukrainian/Russia conflict and its impact on commodity prices;

particularly oil and gas;

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DXP Enterprises, Inc.

is a business-to-business distributor of maintenance, repair and operating and production ("MRO") products and services to a variety of customers in different end markets primarily across North America.

is a business-to-business distributor of MRO 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.

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The full impact of the conflict on the Company’s business and financial results remains uncertain and will depend on the severity and duration of the war and its impact on global economic conditions.

As the world recovered and reopened during fiscal 2021, and continuing into the current fiscal year, the global commodity and labor markets experienced significant inflationary pressures attributable to economic recovery and supply chain issues tightening caused by the COVID-19 pandemic and the Ukrainian-Russia conflict mentioned above.

These inflationary trends increased the cost of many of the products we buy.

As a distributor, we often remain neutral to inflation as those costs are generally passed

onto customers.

The Company was able to implement these and other strategies designed to mitigate some of the adverse effects of higher costs during the first quarter of fiscal 2022 while also remaining price competitive.

The global commodity and labor markets experienced significant inflationary pressures attributable to economic recovery and supply chain issues tightening caused by the COVID-19 pandemic and the Ukrainian-Russia conflict mentioned above.

inflationary trends increased the cost of many of the products we buy.

As a distributor, we often remain neutral to inflation as those costs are generally passed onto customers.

The Company was able to pass price increases onto customers and implement other strategies designed to mitigate some of the adverse effects of higher costs during the six months ended June 30, 2022.

COVID-19 Pandemic Impact

The COVID-19 pandemic began in the first quarter of 2020 and continued throughout the first quarter of fiscal 2022, causing significant disruptions in the U.S.

The COVID-19 pandemic began in the first quarter of 2020 and continued throughout the six months ended June 30, 2022, causing disruptions in the U.S.

and global markets.

While the ongoing recovery continues, it has been accompanied by a resurgence in demand as industries return to regular operations, which continues to disrupt supply chains, transportation efficiency, product and labor availability.

While the ongoing recovery continues, it has been accompanied by a resurgence in demand, as industries return to regular operations.

The full extent and long-term impacts on the Company’s business and financial results will depend on several uncertain and unpredictable developments including any continued spread of the virus and its variants, the availability and effectiveness of treatments and vaccines, imposition of protective public safety measures and the overall impact of government measures to combat the spread of the virus.

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Matters Affecting Comparability

There were 64 business days in the three months ended March 31, 2022 and 63 business days in the three months ended March 31, 2021.

Service Centers & Supply Chain Services Segments

There were 127 business days in the six months ended June 30, 2022 and 126 business days in the six months ended June 30, 2021.

Service Centers and 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.

Long-term economic conditions remain uncertain with regard to COVID-19 and its impact on various end markets, however, recent order activity improved as markets strengthened and restrictions and mandates were lifted.

In the first quarter of 2022, we had approximately $266.4 million in sales in our Service Centers and Supply Chain Services segment, an increase of approximately 19.8 percent over the first quarter of 2021.

We expect financial results to continually improve with interim periods of potential setback should new variants arise or other economic headwinds prevail.

The Company's recent order activity improved as markets strengthened.

For the six months ended June 30, 2022, we had approximately $576.4 million in sales in our Service Centers and Supply Chain Services segment, an increase of approximately 22.3 percent over the six months ended June 30, 2021.

We expect financial results to continually improve with interim periods of potential setback should new COVID-19 variants arise or other economic headwinds prevail.

Innovative Pumping Solutions Segment

In the first quarter of 2022, we had approximately $53.1 million in sales in our Innovative Pumping Solutions segment, an increase of approximately $29.8 million over the first quarter of 2021, of which $9.1 million was associated with recent acquisitions in the water and wastewater market.

For the six months ended June 30, 2022, we had approximately $110.8 million in sales in our Innovative Pumping Solutions segment, an increase of approximately $50.9 million over the six months ended June 30, 2021, of which $18.0 million was associated with recent acquisitions in the water and wastewater markets.

Beginning in the latter 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 oil & gas demand recovery led to higher commodity prices.

The increasing optimism related to oil and gas demand recovery led to higher commodity prices.

Although demand levels remained below pre-pandemic levels, there is growing confidence of returning to 2019 levels in the coming years.

In the first quarter of 2022, the Ukrainian-Russia conflict caused further disruption in the global oil and gas supply and spurred price increases around the world.

These forces contributed to higher spend by oil and gas producers and thus an increase in oil & gas projects within our Innovative Pumping Solutions segment.

These forces contributed to higher spending by oil and gas producers and thus an increase in oil and gas projects within our Innovative Pumping Solutions segment.

We expect to benefit from the increased activity throughout 2022.

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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 are engaged in providing 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.

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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 March 31,

Three Months Ended June 30,

2022 % 2021 %

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Selling, general and administrative expenses 78,342 21.3 % 70,432 24.7 %

Impairment and other charges — — % — — %

Income from operations $ 25,920 7.0 % $ 14,846 5.2 %

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Diluted earnings per share 0.74 $ 0.41

Three Months Ended March 31, 2022 compared to Three Months Ended March 31, 2021

Sales for the three months ended March 31, 2022 increased $73.8 million, or 30.1 percent, to approximately $319.4 million from $245.6 million for the prior year's corresponding period.

Sales from businesses acquired for three months ended March 31, 2022, accounted for $13.1 million of the sales for the three months ended March 31, 2022.

Three Months Ended June 30, 2022 compared to Three Months Ended June 30, 2021

Sales for the three months ended June 30, 2022 increased $82.1 million, or 28.7 percent, to approximately $367.8 million from $285.7 million for the prior year's corresponding period.

Sales from businesses acquired for three months ended June 30, 2022, accounted for $21.3 million of the sales for the three months ended June 30, 2022.

This overall sales increase is the result of an increase in sales in our SC, IPS and SCS segments of $41.5 million, $21.1 million and $19.6 million, respectively.

The fluctuations in sales are further explained in our business segment discussions below.

Three Months Ended March 31,

Three Months Ended June 30,

2022 2021 Change Change%

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Service Centers segment.

Sales for the SC segment increased by approximately $32.4 million, or 17.4 percent for the three months ended March 31, 2022 compared to the prior year's corresponding period.

Sales for the SC segment increased by approximately $41.5 million, or 19.8 percent for the three months ended June 30, 2022 compared to the prior year's corresponding period.

Excluding $12.5 million of Service Centers segment sales associated with recent acquisitions, sales increased $29.0 million from the prior year's corresponding period.

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Innovative Pumping Solutions segment .

Sales for the IPS segment increased by $29.8 million, or 128.3 percent, for the three months ended March 31, 2022 compared to the prior year's corresponding period.

Sales for the IPS segment increased by $21.1 million, or 57.3 percent, for the three months ended June 30, 2022 compared to the prior year's corresponding period.

Excluding $8.8 million of IPS segment sales from recent acquisitions, IPS segment sales increased $12.2 million from the prior year's corresponding period.

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Supply Chain Services segment.

Sales for the SCS segment increased by $11.6 million, or 32.2 percent, for the three months ended March 31, 2022, 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 as pandemic restrictions subsided and the economy rebounded.

Sales for the SCS segment increased by $19.6 million, or 49.8 percent, for the three months ended June 30, 2022, compared to the prior year's corresponding period.

The improved sales are primarily related to the addition of a new customer in the diversified chemicals market, as well as sales increases in the medical technology, food and beverage and oil and gas markets.

GROSS PROFIT.

Gross profit as a percentage of sales for the three months ended March 31, 2022 was 29.7 percent versus 29.2 percent in the prior year's corresponding period.

Gross profit as a percentage of sales for the three months ended June 30, 2022 was 28.3 percent versus 29.8 percent in the prior year's corresponding period.

Excluding the impact of the businesses acquired, gross profit as a percentage of sales was 28.0 percent.

The increase in the gross profit percentage excluding the businesses acquired is primarily the result of an increase in overall project activity within our IPS segment.

The decrease in the gross profit percentage excluding the businesses acquired is primarily the result of a decrease within our SCS segment.

Service Centers segment.

As a percentage of sales, the first quarter gross profit percentage for the SC segment increased approximately 127 basis points.

Adjusting for the businesses acquired, gross profit as a percentage of sales increased approximately 133 basis points from the prior year's corresponding period.

This was primarily was a result of volume increases and product mix.

Gross profit for the SC segment, excluding businesses acquired, increased $11.3 million, or 20.4 percent, during the three months ended March 31, 2022 compared to the prior year’s corresponding period.

As a percentage of sales, the second quarter gross profit percentage for the SC segment decreased approximately 48 basis points.

Adjusting for the businesses acquired, gross profit as a percentage of sales decreased approximately 73 basis points from the prior year's corresponding period.

This was primarily as a result of product mix.

Gross profit for the SC segment, excluding businesses acquired, increased $7.2 million, or 11.1 percent, during the three months ended June 30, 2022 compared to the prior year’s corresponding period.

Innovative Pumping Solutions segment.

As a percentage of sales, the first quarter gross profit percentage for the IPS segment decreased approximately 493 basis points.

Adjusting for the business acquired, gross profit as a percentage of sales decreased approximately 645 basis points from the prior year's corresponding period.

The decrease in gross profit percentage is primarily due to a mix shift (higher margin international work and domestic water and wastewater projects).

As a percentage of sales, the second quarter gross profit percentage for the IPS segment increased approximately 9 basis points.

Adjusting for the businesses acquired, gross profit as a percentage of sales decreased approximately 50 basis points from the prior year's corresponding period.

The aforementioned decrease in gross profit percentage as a percentage of sales is primarily due to a mix shift (lower margin oil and gas work versus domestic water and wastewater projects).

Gross profit dollars increased $3.4 million compared to the prior year corresponding period, excluding business acquired, primarily as a result of an increase in project work as a result of an increase in capital spending by our customers.

Supply Chain Services segment.

Gross profit as a percentage of sales for the SCS segment increased approximately 80 basis points compared to the prior year's corresponding period.

Gross profit for the first quarter of 2022 increased $3.0 million or 36.8% compared to the prior year's corresponding period.

Gross profit as a percentage of sales for the SCS segment decreased approximately 635 basis points compared to the prior year's corresponding period.

Gross profit for the second quarter of 2022 increased $1.0 million or 10.8% compared to the prior year's corresponding period.

SELLING, GENERAL AND ADMINISTRATIVE ("SG&A").

Selling, general and administrative expense for the three months ended March 31, 2022 increased by approximately $7.9 million, or 12.1%, to $73.3 million from $65.4 million for the prior year's corresponding period.

Selling, general and administrative expense for the three months ended June 30, 2022 increased by approximately $7.9 million, or 11.2%, to $78.3 million from $70.4 million for the prior year's corresponding period.

Selling, general and administrative expense from businesses acquired accounted for $4.0 million.

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OPERATING INCOME.

Operating income for the first quarter of 2022 increased by $15.3 million to $21.6 million, from $6.2 million in the prior year's corresponding period.

Operating income for the second quarter of 2022 increased by $11.1 million to $25.9 million, from $14.8 million in the prior year's corresponding period.

This increase in operating income is primarily related to the aforementioned increased business activity across all segments.

INTEREST EXPENSE.

Interest expense for the first quarter of 2022 increased $0.1 million compared with the prior year's corresponding period .

Interest expense for the second quarter of 2022 remained materially consistent with an increase of $0.3 million compared with the prior year's corresponding period.

INCOME TAXES.

Our effective tax rate from continuing operations was a tax expense of 21.0 percent for the three months ended March 31, 2022 compared to a tax expense of 90.9 percent for the three months ended March 31, 2021.

Our effective tax rate from continuing operations was a tax expense of 25.5 percent for the three months ended June 30, 2022 compared to a tax expense of 17.4 percent for the three months ended June 30, 2021.

Compared to the U.S.

statutory rate for the three months ended March 31, 2022, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions recorded due to tax authorities’ auditing of research and development tax credits.

The effective tax rate was decreased by research and development tax credits and other tax credits.

statutory rate for the three months ended June 30, 2022, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions recorded for research and development tax credits and was partially offset by research and development tax credits and other tax credits.

Compared to the U.S.

statutory rate for the three months ended March 31, 2021, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions recorded due to tax authorities’ auditing of research and development tax credits.

The effective tax rate was decreased by research and development tax credits and other tax credits.

statutory rate for the three months ended June 30, 2021, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions recorded for research and development tax credits and partially offset by research and development tax credits and other tax credits.

Six Months Ended June 30,

2022 % 2021 %

Sales $ 687,223 100.0 % $ 531,278 100.0 %

Cost of sales 488,076 71.0 % 374,370 70.5 %

Gross profit $ 199,147 29.0 % $ 156,908 29.5 %

Selling, general and administrative expenses 151,667 22.1 % 135,829 25.6 %

Income from operations $ 47,480 6.9 % $ 21,079 4.0 %

Other (income) expense, net 1,377 0.2 % (535) (0.1) %

Interest expense 10,777 1.6 % 10,580 2.0 %

Income before income taxes $ 35,326 5.1 % $ 11,034 2.1 %

Provision for income taxes 8,305 1.2 % 2,945 0.6 %

Net income $ 27,021 3.9 % $ 8,089 1.5 %

Net loss attributable to noncontrolling interest (53) — (401) — %

Net income attributable to DXP Enterprises, Inc.

$ 27,074 3.9 % $ 8,490 1.6 %

Per share amounts attributable to DXP Enterprises, Inc.

Basic earnings per share $ 1.45 $ 0.44

Diluted earnings per share $ 1.39 $ 0.42

Six Months Ended June 30, 2022 compared to Six Months Ended June 30, 2021

Sales for the six months ended June 30, 2022 increased $155.9 million, or 29.4 percent, to approximately $687.2 million from $531.3 million for the prior year's corresponding period.

Sales from businesses acquired accounted for $34.5 million of the sales for the six months ended June 30, 2022.

This sales increase is the result of an increase in sales in our SC, IPS and SCS segments of $73.9 million, $50.9 million and $31.2 million, respectively.

The fluctuations in sales are further explained in our business segment discussions below.

Six Months Ended June 30,

2022 2021 Change Change%

Sales by Business Segment (in thousands, except change%)

Service Centers 469,894 396,002 $ 73,892 18.7 %

Innovative Pumping Solutions 110,846 59,972 50,874 84.8 %

Supply Chain Services 106,483 75,304 31,179 41.4 %

Total DXP Sales $ 687,223 $ 531,278 $ 155,945 29.4 %

Service Centers segment.

Sales for the SC segment increased by $73.9 million, or 18.7 percent for the six months ended June 30, 2022 compared to the prior year's corresponding period.

Excluding $16.5 million of Service Center segment sales for the six months ended June 30, 2022 from businesses acquired, SC segment sales increased $57.4 million, or 14.5 percent from the prior year's corresponding period.

This sales increase is primarily the result of increased sales of metal working products, safety services and bearings product lines to customers engaged in operating and maintenance services in oil and gas markets in connection with increased capital spending by oil and gas producers.

Innovative Pumping Solutions segment .

Sales for the IPS segment increased by $50.9 million, or 84.8 percent for the six months ended June 30, 2022 compared to the prior year's corresponding period.

Excluding $18.0 million of IPS segment sales for the six months ended June 30, 2022 from businesses acquired, IPS segment sales increased $32.9 million, or 54.9 percent from the prior year's corresponding period.

This increase was primarily the result of an increase in the capital spending by oil and gas producers and related businesses.

The current level of IPS sales activity could continue during the remainder of 2022, as a result of increased optimism related to oil and gas demand recovery.

Supply Chain Services segment.

Sales for the SCS segment increased by $31.2 million, or 41.4 percent, for the six months ended June 30, 2022, compared to the prior year's corresponding period.

The improved sales are primarily related to increased sales to customers in the food and beverage, general manufacturing and aerospace industries as pandemic restrictions subsided and the economy rebounded.

GROSS PROFIT.

Gross profit as a percentage of sales for the six months ended June 30, 2022 decreased by approximately 56 basis points from the prior year's corresponding period.

Excluding the impact of the businesses acquired, gross profit as a percentage of sales decreased by approximately 84 basis points.

The decrease in the gross profit percentage is primarily the result of an approximate 311 basis point and 288 basis point decrease in the gross profit percentage in our SC and IPS segments partially offset by a 24 basis point increase in the gross profit percentage in our SC segment, excluding businesses acquired.

Service Centers segment.

As a percentage of sales, the six months ended June 30, 2022 gross profit percentage for the Service Centers increased approximately 34 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 as well as the positive impact of the businesses acquired.

Innovative Pumping Solutions segment.

As a percentage of sales, the six months ended June 30, 2022 gross profit percentage for the IPS segment decreased approximately 185 basis points from the prior year's corresponding period.

The decrease in gross profit percentage as a percentage of sales is primarily due to a mix shift (lower margin oil & gas work versus domestic water and wastewater projects).

Gross profit dollars increased $14.2 million, primarily as a result of an increase in the capital spending by oil and gas producers and related businesses.

Supply Chain Services segment.

Gross profit as a percentage of sales decreased approximately 311 basis points, compared to the prior year's corresponding period.

Gross profit for the six months ended June 30, 2022 increased $4.1 million or 22.9 percent compared to the prior year's corresponding period.

SELLING, GENERAL AND ADMINISTRATIVE ("SG&A").

Selling, general and administrative expense for the six months ended June 30, 2022 increased by approximately $15.8 million, or 11.7 percent, to $151.7 million from $135.8 million for the prior year's corresponding period.

Selling, general and administrative expense from businesses acquired accounted for $6.3 million.

Excluding expenses from businesses acquired, SG&A for the six months ended June 30, 2022 increased by $9.6 million, or 7.1 percent.

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 six months ended June 30, 2022 increased by $26.4 million or 125.2% to $47.5 million from $21.1 million in the prior year's corresponding period.

This increase in operating income is primarily related to the aforementioned increased business activity across all segments.

INTEREST EXPENSE.

Interest expense for the six months ended June 30, 2022 remained materially consistent with an increase of $0.2 million compared with the prior year's corresponding period.

INCOME TAXES.

Our effective tax rate from continuing operations was a tax expense of 23.5 percent for the six months ended June 30, 2022 compared to a tax expense of 26.7 percent for the six months ended June 30, 2021.

Compared to the U.S.

statutory rate for the six months ended June 30, 2022, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions recorded for research and development tax credits and was partially offset by research and development tax credits and other tax credits.

Compared to the U.S.

statutory rate for the six months ended June 30, 2021, the effective tax rate was increased by state taxes, foreign taxes, and uncertain tax positions recorded for research and development tax credits and was partially offset by research and development tax credits and other tax credits.

LIQUIDITY AND CAPITAL RESOURCES

General Overview

As of March 31, 2022, we had cash and restricted cash of $36.7 million and credit facility availability of $132.2 million.

We have a $135.0 million asset-based loan ("ABL") facility, partially offset by letters of credit of $2.8 million, that is due to mature in August 2022, under which we had no borrowings outstanding as of March 31, 2022 and a Term Loan B with $325.9 million in borrowings.

The Company intends to amend and extend the ABL prior to the August deadline.

As of June 30, 2022, we had cash and restricted cash of $20.7 million and credit facility availability of $103.0 million.

We have a $135.0 million asset backed revolving line of credit (the "ABL Revolver"), partially offset by letters of credit of $2.9 million, that was due to mature in August 2022, which we had borrowings of $29.1 million outstanding as of June 30, 2022 and a Term Loan B with $325.1 million in borrowings as of June 30, 2022.

On July 19, 2022, the Company amended and extended the ABL Revolver prior to the August deadline.

The ABL Revolver matures on July 19, 2027.

Our primary source of capital is cash flow from operations, supplemented as necessary by bank borrowings or other sources of financing.

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The following table summarizes our net cash flows generated by operating activities, net cash used in investing activities and net cash used in financing activities for the periods presented (in thousands) :

Three Months Ended March 31,

Six Months Ended June 30,

Net Cash Provided by (Used in):

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Operating Activities

The Company generated $2.7 million of cash from operating activities during the three months ended March 31, 2022 compared to $8.6 million of cash generated during the prior year's corresponding period.

The Company generated $5.7 million of cash from operating activities during the six months ended June 30, 2022 compared to $16.2 million of cash generated during the prior year's corresponding period.

The $10.5 million decrease in the amount of cash provided between the two periods was primarily driven by the increase in project work activity during the period.

Cash is generally used to fund project costs in excess of amounts billed.

Cash is generally used to fund project costs ahead of actual billings and collection.

Investing Activities

For the three months ended March 31, 2022, net cash used in investing activities was $6.1 million compared to $0.6 million cash generated during the prior year’s corresponding period.

This $6.7 million increase was primarily driven by the purchase of Drydon and Burlingame in March 2022.

The prior year period also benefited from the sale of a corporate asset totaling $1.3 million without comparable activity in the current year.

For the six months ended June 30, 2022, net cash used in investing activities was $46.0 million compared to a $44.7 million use of cash during the prior year’s corresponding period.

This $1.3 million increase was primarily driven by the sale of a corporate asset in 2021 totaling $1.3 million without comparable activity in the current year which partially offset spending in 2021.

Financing Activities

For the three months ended March 31, 2022, net cash used in financing activities was $9.3 million, compared to net cash used in financing activities of $1.4 million during the prior year’s corresponding period.

The activity in the period was primarily attributed to share repurchase installment payment of $6.8 million related to shares repurchased in 2021 and share purchases in 2022 of $1.5 million.

For the six months ended June 30, 2022, net cash provided by financing activities was $12.0 million, compared to net cash used in financing activities of $12.0 million during the prior year’s corresponding period.

The activity in the period was primarily attributed to a net drawdown on the ABL Revolver.

Partially offsetting cash provided by the drawdown was the final share repurchase installment payment of $13.6 million related to shares authorized for repurchase in 2021, as well as current period share purchases of $1.5 million.

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 three months ended March 31, 2022 we purchased 59 thousand shares for approximately $1.5 million.

Such consideration was funded with existing cash balances and an agreement to pay sellers over four equal quarterly installments beginning on June 15, 2021.

The remaining installment of $6.8 million was included in other current liabilities as of March 31, 2022.

We believe this is adequate funding to support working capital needs within the business.

During the six months ended June 30, 2022 we purchased approximately 59 thousand shares for approximately $1.5 million.

Such consideration was funded with existing cash balances and an agreement to pay sellers over four equal quarterly installments beginning on June 15, 2021 which are presented within the purchase of treasury stock in the cash flow statement.

There are no installment payments outstanding.

Funding Commitments

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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.

The Company believes it has adequate funding and liquidity to meet its 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.

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For a more complete discussion of our significant accounting policies and business practices, refer to the consolidated annual report on Form 10-K filed with the Securities and Exchange Commission on April 5, 2022.

The results of operations for the three months ended March 31, 2022 are not necessarily indicative of results expected for the full fiscal year.

The results of operations for the six months ended June 30, 2022 are not necessarily indicative of results expected for the full fiscal year.

RECENT ACCOUNTING PRONOUNCEMENTS

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis