What changed in this filing

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Item 1. Financial Statements

2021-01-28 compared with 2020-10-21 · 99 added, 80 removed, 391 unchanged (31% of the section changed)

3 unchanged sentences

(In thousands, except share data)

September 27,

2020 March 29,

2 unchanged sentences

Trade receivables — less allowance for doubtful accounts:

$ 552 as of September 27, 2020 and $ 784 as of March 29, 2020

$ 549 as of December 27, 2020 and $ 784 as of March 29, 2020

76,822 67,391

Inventories 64,657 54,436

Income taxes receivable 946 —

Prepaid expenses and other current assets 5,075 4,927

15 unchanged sentences

Accrued payroll and employee benefits 13,406 13,538

Income tax payable 851 59

Current portion of long-term debt 9,907 9,907

7 unchanged sentences

DEFERRED INCOME TAXES 25,097 25,106

DEFERRED COMPENSATION LIABILITY 7,054 5,026

OTHER LONG-TERM LIABILITIES 514 1,114

4 unchanged sentences

30,000,000 shares of $ 0.05 par value;

10,545,203 and 10,512,229 shares issued and outstanding as of September 27, 2020 and March 29, 2020, respectively

10,462,159 and 10,512,229 shares issued and outstanding as of December 27, 2020 and March 29, 2020, respectively

Additional paid-in capital 48,975 50,090

7 unchanged sentences

(In thousands, except share and per-share data)

Three Months Ended Six Months Ended

September 27,

2020 September 29,

2019 September 27,

2020 September 29,

Three Months Ended Nine Months Ended

2020 December 29,

2019 December 27,

2020 December 29,

Sales $ 142,927 $ 120,406 $ 433,900 $ 407,785

17 unchanged sentences

(In thousands)

Three Months Ended Six Months Ended

September 27,

2020 September 29,

2019 September 27,

2020 September 29,

Three Months Ended Nine Months Ended

2020 December 29,

2019 December 27,

2020 December 29,

Net income $ 7,921 $ 4,547 $ 31,899 $ 23,604

26 unchanged sentences

BALANCE — September 27, 2020 10,545,203 $ 527 $ 52,194 $ 201,966 $ ( 50 ) $ 254,637

Cash dividends declared and paid ( 2,471 ) ( 2,471 )

Share-based compensation expense 917 917

Shares repurchased ( 83,044 ) ( 4 ) ( 4,136 ) ( 4,140 )

Other comprehensive income, net of tax 50 50

Net income 7,921 7,921

BALANCE — December 27, 2020 10,462,159 $ 523 $ 48,975 $ 207,416 $ — $ 256,914

Common Stock Additional

20 unchanged sentences

BALANCE — September 29, 2019 10,546,453 $ 527 $ 50,282 $ 178,557 $ 69 $ 229,435

Cash dividends declared and paid ( 2,445 ) ( 2,445 )

Share-based compensation expense 685 685

Other comprehensive income, net of tax ( 11 ) ( 11 )

Net income 4,547 4,547

BALANCE — December 29, 2019 10,546,453 $ 527 $ 50,967 $ 180,659 $ 58 $ 232,211

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Six Months Ended

September 27,

2020 September 29,

Nine Months Ended

2020 December 29,

CASH FLOWS FROM OPERATING ACTIVITIES:

3 unchanged sentences

Operating leases 1,419 1,538

Amortization of debt issuance costs 47 47

Gain on deferred compensation assets ( 1,282 ) ( 274 )

22 unchanged sentences

Net cash provided by (used in) financing activities 25,149 ( 27,825 )

NET DECREASE IN CASH AND CASH EQUIVALENTS ( 1,117 ) ( 5,143 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,692 ( 1,934 )

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,277 9,199

14 unchanged sentences

All significant intercompany accounts and transactions have been eliminated in consolidation.

The results of operations for the six months ended September 27, 2020 are not necessarily indicative of the results that may be expected for the full year.

The results of operations for the nine months ended December 27, 2020 are not necessarily indicative of the results that may be expected for the full year.

References to fiscal 2019 refer to the fiscal year ended March 31, 2019, references to fiscal 2020 refer to the fiscal year ended March 29, 2020 and references to fiscal 2021 refer to the fiscal year ending March 28, 2021.

10 unchanged sentences

Our adoption of this ASU impacted our method for calculating and estimating our allowance for doubtful accounts but did not have a material impact to our financial position or results of operations.

Note 2 — Business Combinations

Note 2 — Acquisitions

Acquisition of American Development Corporation of Tennessee, Inc.

On July 28, 2020, we acquired substantially all the assets of American Development Corporation of Tennessee, Inc.

(“ADC”) under the terms of an asset purchase agreement with ADC and its shareholders.

We paid $ 25 million for the acquisition, using funds available on our revolver to fund the acquisition.

(“ADC”) under the terms of an asset purchase agreement among us, ADC and its shareholders.

We paid $ 25 million for the acquisition, using funds available under our revolving credit facility with U.S.

Bank National Association to fund the acquisition.

ADC is a water treatment chemical distribution company operating primarily in Tennessee, Georgia and Kentucky.

1 unchanged sentence

Costs associated with this transaction were not material and were expensed as incurred.

The acquisition has been accounted for under the acquisition method of accounting, under which the total purchase price is allocated to the net tangible and intangible assets and liabilities of ADC acquired in connection with the acquisition based on their estimated fair values.

The acquisition has been accounted for as a business combination, under which the total purchase price is allocated to the net tangible and intangible assets and liabilities of ADC acquired in connection with the acquisition based on their estimated fair values.

We estimated the fair values of the assets acquired and liabilities assumed using a discounted cash flow analysis (income approach).

3 unchanged sentences

Such goodwill is expected to be deductible for tax purposes.

The purchase price allocation is preliminary and subject to adjustment within the first 12 months following the acquisition.

The purchase price allocation is final.

Acquisition of Property :

On December 16, 2020, we acquired a manufacturing facility on 28 acres located adjacent to our facility in Rosemount, Minnesota to allow further expansion and growth in both our Industrial and Water Treatment segments.

We paid $ 10 million for the property.

The purchase of this facility adds approximately 40,000 square feet of manufacturing and warehouse space to bring us to a total of 105,000 square feet of space on 56 acres of land in the area, with

rail access at both of the sites to allow for future growth and provide for supply chain flexibility on certain raw materials to better serve the customer.

This acquisition has been accounted for as a property purchase.

Note 3 - Revenue

3 unchanged sentences

Types of products sold within each operating segment help us to further evaluate the financial performance of our segments.

The following tables disaggregate external customer net sales by major revenue stream for the three and six months ended September 27, 2020 and September 29, 2019:

Three months ended September 27, 2020

The following tables disaggregate external customer net sales by major revenue stream for the three and nine months ended December 27, 2020 and December 29, 2019:

Three months ended December 27, 2020

(In thousands) Industrial Water

7 unchanged sentences

Total external customer sales $ 64,356 $ 39,298 $ 39,273 $ 142,927

Three months ended September 29, 2019

Three months ended December 29, 2019

(In thousands) Industrial Water

7 unchanged sentences

Total external customer sales $ 63,018 $ 34,890 $ 22,498 $ 120,406

Six months ended September 27, 2020

Nine months ended December 27, 2020

(In thousands) Industrial Water

7 unchanged sentences

Total external customer sales $ 197,029 $ 128,552 $ 108,319 $ 433,900

Six months ended September 29, 2019

Nine months ended December 29, 2019

(In thousands) Industrial Water

16 unchanged sentences

We recognize revenue upon transfer of control of the promised products to the customer, with revenue recognized at the point in time the customer obtains control of the products.

arrangements where product is shipped directly from the vendor to our customer, we act as the principal in the transaction as we direct the other party to provide the product to our customer on our behalf, take inventory risk, establish the selling price, and are exposed to credit risk for the collection of the invoiced amount.

In arrangements where product is shipped directly from the vendor to our customer, we act as the principal in the transaction as we direct the other party to provide the product to our customer on our behalf, take inventory risk, establish the selling price, and are exposed to credit risk for the collection of the invoiced amount.

If there were circumstances where we were to manufacture products for customers that were unique to their specifications and we would be prohibited by contract to use the product for any alternate use, we would recognize revenue over time if all criteria were met.

12 unchanged sentences

Basic and diluted EPS were calculated using the following:

Three Months Ended Six Months Ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

Three Months Ended Nine Months Ended

December 27, 2020 December 29, 2019 December 27, 2020 December 29, 2019

Weighted-average common shares outstanding—basic 10,506,918 10,546,453 10,521,521 10,575,432

3 unchanged sentences

Note 5 – Derivative Instruments

We have an interest rate swap agreement to manage the risk associated with a portion of our variable-rate long-term debt.

We had an interest rate swap agreement to manage the risk associated with a portion of our variable-rate long-term debt.

We do not utilize derivative instruments for speculative purposes.

The interest rate swap involves the exchange of fixed-rate and variable-rate payments without the exchange of the underlying notional amount on which the interest payments are calculated.

The $ 20 million swap agreement will terminate on December 23, 2020.

We have designated this swap as a cash flow hedge and have determined that it qualifies for hedge accounting treatment.

For so long as the hedge is effective, changes in fair value of the cash flow hedge are recorded in other comprehensive income (net of tax) until income or loss from the cash flows of the hedged item is realized.

For the three and six months ended September 27, 2020, we recorded a no minal amount in other comprehensive income related to unrealized gains (net of tax) on the cash flow hedge described above.

For the three months ended September 29, 2019, we recorded $ 0.1 million in other comprehensive loss related to unrealized losses (net of tax) on the cash flow hedge.

For the six months ended September 29, 2019, we recorded $ 0.2 million in other comprehensive loss related to unrealized losses (net of tax) on the cash flow hedge.

Included in other current liabilities on our condensed consolidated balance sheet was $ 0.1 million as of September 27, 2020 and March 29, 2020.

Unrealized gains and losses will be reflected in net income when the related cash flows or hedged transactions occur and offset the related performance of the hedged item.

The interest rate swap involves the exchange of fixed-rate and variable-rate payments without the exchange of the underlying no tional amount on which the interest payments are calculated.

The $ 20 million swap agreement terminated on December 23, 2020.

We had designated this swap as a cash flow hedge and determined that it qualified for hedge accounting treatment.

For so long as the hedge was effective, changes in fair value of the cash flow hedge were recorded in other comprehensive income (net of tax) until income or loss from the cash flows of the hedged item was realized.

For the three and nine months ended December 27, 2020, we recorded $ 0.1 million in other comprehensive income related to unrealized gains (net of tax) on the cash flow hedge described above.

For the three months ended December 29, 2019, we recorded a no minal amount in other comprehensive loss related to unrealized losses (net of tax) on the cash flow hedge.

For the nine months ended December 29, 2019, we recorded $ 0.3 million in other comprehensive loss related to unrealized losses (net of tax) on the cash flow hedge.

Included in other current liabilities on our condensed consolidated balance sheet was $ 0.1 million as of March 29, 2020.

The interest rate swap ended on December 23, 2020, and is therefore no longer recorded on our balance sheet.

By their nature, derivative instruments are subject to market risk.

14 unchanged sentences

Our financial assets that are measured at fair value on a recurring basis are an interest rate swap and assets held in a deferred compensation retirement plan.

As of September 27, 2020 and March 29, 2020, the assets held in a deferred compensation retirement plan are classified as other long-term assets on our balance sheet, with the portion of the plan assets expected to be paid within twelve months classified as current assets and the interest rate swap is classified as other current liabilities on our balance sheet.

The fair value of the interest rate swap is determined by the respective counterparties based on interest rate changes.

As of December 27, 2020 and March 29, 2020, the assets held in a deferred compensation retirement plan are classified as other long-term assets on our balance sheet, with the portion of the plan assets expected to be paid within twelve months classified as current assets and the interest rate swap was classified as other current liabilities on our balance sheet.

The fair value of the interest rate swap was determined by the respective counterparties based on interest rate changes.

Interest rate swaps are valued based on observable interest rate yield curves for similar instruments.

2 unchanged sentences

The fair value of the deferred compensation is based on the quoted market prices for the mutual funds at the end of the period.

The following tables summarize the balances of assets and liabilities measured at fair value on a recurring basis as of September 27, 2020 and March 29, 2020.

(In thousands) September 27, 2020 March 29, 2020

The following tables summarize the balances of assets and liabilities measured at fair value on a recurring basis as of December 27, 2020 and March 29, 2020.

(In thousands) December 27, 2020 March 29, 2020

Deferred compensation plan assets Level 1 $ 5,937 $ 3,564

4 unchanged sentences

Note 8 – Inventories

Inventories at September 27, 2020 and March 29, 2020 consisted of the following:

September 27,

Inventories at December 27, 2020 and March 29, 2020 consisted of the following:

2020 March 29,

3 unchanged sentences

Net inventory $ 64,657 $ 54,436

The first in, first out (“FIFO”) value of inventories accounted for under the last in, first out (“LIFO”) method was $ 44.6 million at September 27, 2020 and $ 43.3 million at March 29, 2020.

The first in, first out (“FIFO”) value of inventories accounted for under the last in, first out (“LIFO”) method was $ 43.7 million at December 27, 2020 and $ 43.3 million at March 29, 2020.

The remainder of the inventory was valued and accounted for under the FIFO method.

Note 9 – Goodwill and Intangible Assets

The carrying amount of goodwill was $ 67.7 million as of September 27, 2020 and $ 58.4 million as of March 29, 2020, of which $ 44.9 million was related to our Health and Nutrition segment, $ 16.3 million was related to our Water Treatment segment, and $ 6.5 million was related to our Industrial segment.

The increase in goodwill during the six months ended September 27, 2020 represents preliminary goodwill recorded in connection with the ADC acquisition as discussed in Note 2.

A summary of our intangible assets as of September 27, 2020 and March 29, 2020 is as follows:

September 27, 2020 March 29, 2020

The carrying amount of goodwill was $ 67.7 million as of December 27, 2020 and $ 58.4 million as of March 29, 2020, of which $ 44.9 million was related to our Health and Nutrition segment, $ 16.3 million was related to our Water Treatment segment, and $ 6.5 million was related to our Industrial segment.

The increase in goodwill during the nine months ended December 27, 2020 represents goodwill recorded in connection with the ADC acquisition as discussed in Note 2.

A summary of our intangible assets as of December 27, 2020 and March 29, 2020 is as follows:

December 27, 2020 March 29, 2020

(In thousands) Gross

11 unchanged sentences

Note 10 – Debt

Debt at September 27, 2020 and March 29, 2020 consisted of the following:

September 27,

Debt at December 27, 2020 and March 29, 2020 consisted of the following:

2020 March 29,

10 unchanged sentences

income tax jurisdictions.

Our effective tax rate for the six months ended September 27, 2020 was 26.4 % and was 26.3 % for the six months ended September 29, 2019.

Our effective tax rate for the nine months ended December 27, 2020 was 26.1 % and was 26.6 % for the nine months ended December 29, 2019.

The effective tax rate is impacted by projected levels of annual taxable income, permanent items, and state taxes.

1 unchanged sentence

Lease Obligations.

As of September 27, 2020, we were obligated under operating lease agreements for certain manufacturing facilities, warehouse space, the land on which some of our facilities sit, vehicles and information technology equipment.

As of December 27, 2020, we were obligated under operating lease agreements for certain manufacturing facilities, warehouse space, the land on which some of our facilities sit, vehicles and information technology equipment.

Our leases have remaining lease terms of 1 year to 24 years, some of which include options to extend the lease for up to 10 years .

As of September 27, 2020, our operating lease components with initial or remaining terms in excess of one year were classified on the condensed consolidated balance sheet within right of use assets, short-term lease liability and long-term lease liability.

Expense for leases less than 12 months for the six months ended September 27, 2020 was no t material.

Total lease expense was $ 0.7 million for both the three months ended September 27, 2020 and September 29, 2019.

Total lease expense for the six months ended September 27, 2020 and September 29, 2019 was $ 1.4 million and $ 1.5 million, respectively.

As of December 27, 2020, our operating lease components with initial or remaining terms in excess of one year were classified on the condensed consolidated balance sheet within right of use assets, short-term lease liability and long-term lease liability.

Expense for leases less than 12 months for the nine months ended December 27, 2020 was no t material.

Total lease expense was $ 0.7 million for both the three months ended December 27, 2020 and December 29, 2019.

Total lease expense for the nine months ended December 27, 2020 and December 29, 2019 was $ 2.1 million and $ 2.2 million, respectively.

Other information related to our operating leases was as follows:

September 27, 2020

December 27, 2020

Lease Term and Discount Rate

1 unchanged sentence

Weighted average discount rate 3.2 %

Maturities of lease liabilities as of September 27, 2020 were as follows:

Maturities of lease liabilities as of December 27, 2020 were as follows:

(In thousands) Operating Leases

15 unchanged sentences

We are recording the compensation expense for the outstanding performance share units and the converted restricted stock over the life of the awards.

The following table represents the restricted stock activity for the six months ended September 27, 2020:

The following table represents the restricted stock activity for the nine months ended December 27, 2020:

Shares Weighted-

6 unchanged sentences

Unvested at end of period 119,560 $ 35.89

We recorded compensation expense related to performance share units and restricted stock of $ 0.5 million and $ 1.0 million for the three and six months ended September 27, 2020, respectively.

We recorded compensation expense related to performance share units and restricted stock of $ 0.4 million and $ 0.8 million for the three and six months ended September 29, 2019, respectively.

We recorded compensation expense related to performance share units and restricted stock of $ 0.7 million and $ 1.6 million for the three and nine months ended December 27, 2020, respectively.

We recorded compensation expense related to performance share units and restricted stock of $ 0.5 million and $ 1.3 million for the three and nine months ended December 29, 2019, respectively.

Substantially all of the compensation expense was recorded in selling, general and administrative expenses in the condensed consolidated statements of income.

1 unchanged sentence

As part of their retainers, each director who is not an executive officer receives an annual grant of restricted stock for their service on our Board.

The restricted stock awards are expensed over the requisite vesting period, which is one year from the date of issuance, based on the market value on the date of grant.

As of September 27, 2020, there were 5,874 shares of restricted stock with a grant date fair value of $ 51.06 outstanding under this program.

Compensation expense for both the three months ended September 27, 2020 and September 29, 2019 related to restricted stock awards to the Board was $ 0.1 million.

Compensation expense for both the six months ended September 27, 2020 and September 29, 2019 related to restricted stock awards to the Board was $ 0.2 million.

The restricted stock awards are expensed over the requisite vesting period, which is generally one year from the date of issuance, based on the market value on the date of grant.

As of December 27, 2020, there were 6,593 shares of restricted stock with an average grant date fair value of $ 51.17 outstanding under this program.

Compensation expense for both the three months ended December 27, 2020 and December 29, 2019 related to restricted stock awards to the Board was $ 0.1 million.

Compensation expense for both the nine months ended December 27, 2020 and December 29, 2019 related to restricted stock awards to the Board was $ 0.2 million.

Note 14 – Share Repurchase Program

1 unchanged sentence

Upon purchase of the shares, we reduce our common stock for the par value of the shares with the excess applied against additional paid-in capital.

During the three and six months ended September 27, 2020, no shares were repurchased.

During the three months ended September 29, 2019, we repurchased 44,259 shares at an aggregate purchase price of $ 2.0 million.

During the six months ended September 29, 2019, we repurchased 91,395 shares at an aggregate purchase price of $ 3.8 million.

As of September 27, 2020, 358,797 shares remained available to be repurchased under the share repurchase program.

During the three and nine months ended December 27, 2020, we repurchased 83,044 shares at an aggregate purchase price of $ 4.1 million.

During the three months ended December 29, 2019, no shares were repurchased.

During the nine months ended December 29, 2019, we repurchased 91,395 shares at an aggregate purchase price of $ 3.8 million.

As of December 27, 2020, 275,753 shares remained available to be repurchased under the share repurchase program.

Note 15 – Litigation, Commitments and Contingencies

15 unchanged sentences

Treatment Health and Nutrition Total

Three months ended September 27, 2020:

Three months ended December 27, 2020:

Sales $ 64,356 $ 39,298 $ 39,273 $ 142,927

2 unchanged sentences

Operating income 2,229 3,239 5,021 10,489

Three months ended September 29, 2019:

Three months ended December 29, 2019:

Sales $ 63,018 $ 34,890 $ 22,498 $ 120,406

2 unchanged sentences

Operating income 2,368 3,528 880 6,776

Six months ended September 27, 2020:

Nine months ended December 27, 2020:

Sales $ 197,029 $ 128,552 $ 108,319 $ 433,900

2 unchanged sentences

Operating income 12,626 18,234 12,143 43,003

Six months ended September 29, 2019:

Nine months ended December 29, 2019:

Sales $ 206,433 $ 124,010 $ 77,342 $ 407,785

2 unchanged sentences

Operating income 11,966 18,250 3,698 33,914

No significant changes to identifiable assets by segment occurred during the six months ended September 27, 2020.

No significant changes to identifiable assets by segment occurred during the nine months ended December 27, 2020.

Note 17 – Subsequent Events

On December 30, 2020, we acquired substantially all the assets of C & L Aqua Professionals, Inc.

Blending, Inc.

(together, “C&L Aqua”) for $ 16 million under the terms of an asset purchase agreement among us, C&L Aqua and its shareholders.

C&L Aqua is a water treatment chemical distribution company operating primarily in Louisiana.

The results of operations and the assets, including the goodwill associated with this acquisition, will be included as part of our Water Treatment segment from the date of acquisition forward.

The purchase accounting for this acquisition has not yet been completed.

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 1. Financial Statements