What changed in this filing

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Item 1. Financial Statements

2021-10-27 compared with 2021-07-29 · 124 added, 50 removed, 317 unchanged (35% of the section changed)

3 unchanged sentences

(In thousands, except share data)

September 26,

2021 March 28,

38 unchanged sentences

60,000,000 shares of $ 0.01 par value;

20,946,404 and 20,969,746 shares issued and outstanding as of June 27, 2021 and March 28, 2021, respectively

20,888,923 and 20,969,746 shares issued and outstanding as of September 26, 2021 and March 28, 2021, respectively

Additional paid-in capital 44,801 51,138

6 unchanged sentences

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

Three Months Ended

2021 June 28,

Three Months Ended Six Months Ended

September 26,

2021 September 27,

2020 September 26,

2021 September 27,

Sales $ 183,277 $ 147,801 $ 364,518 $ 290,973

17 unchanged sentences

(In thousands)

Three Months Ended

2021 June 28,

Three Months Ended Six Months Ended

September 26,

2021 September 27,

2020 September 26,

2021 September 27,

Net income $ 14,133 $ 12,190 $ 30,761 $ 23,978

Other comprehensive loss, net of tax:

Unrealized loss on interest rate swap — ( 10 )

Unrealized gain on interest rate swap — 39 — 29

Total comprehensive income $ 14,133 $ 12,229 $ 30,761 $ 24,007

16 unchanged sentences

BALANCE — June 27, 2021 20,946,404 $ 210 $ 47,069 $ 227,926 $ — $ 275,205

Cash dividends declared and paid — — — ( 2,756 ) — ( 2,756 )

Share-based compensation expense — — 862 — — 862

Vesting of restricted stock 11,228 — — — — —

ESPP shares issued 40,300 — 889 — — 889

Shares repurchased ( 109,009 ) ( 1 ) ( 4,019 ) — — ( 4,020 )

Net income — — — 14,133 — 14,133

BALANCE — September 26, 2021 20,888,923 $ 209 $ 44,801 $ 239,303 $ — $ 284,313

Common Stock Additional

11 unchanged sentences

BALANCE — June 28, 2020 21,031,670 $ 211 $ 51,051 $ 192,256 $ ( 89 ) $ 243,429

Cash dividends declared and paid — — — ( 2,480 ) — ( 2,480 )

Share-based compensation expense — — 686 — — 686

Vesting of restricted stock 16,016 — — — — —

ESPP shares issued 42,720 — 773 — — 773

Other comprehensive gain, net of tax — — — — 39 39

Net income — — — 12,190 — 12,190

BALANCE — September 27, 2020 21,090,406 $ 211 $ 52,510 $ 201,966 $ ( 50 ) $ 254,637

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Three Months Ended

2021 June 28,

Six Months Ended

September 26,

2021 September 27,

CASH FLOWS FROM OPERATING ACTIVITIES:

16 unchanged sentences

Purchases of property, plant, and equipment ( 6,904 ) ( 8,120 )

Acquisitions ( 1,200 ) ( 25,000 )

Other 181 105

Net cash used in investing activities ( 7,923 ) ( 33,015 )

1 unchanged sentence

Cash dividends declared and paid ( 5,356 ) ( 4,959 )

New shares issued 889 773

Shares surrendered for payroll taxes ( 1,467 ) ( 54 )

2 unchanged sentences

Net cash (used in) provided by financing activities ( 28,355 ) 11,760

NET INCREASE IN CASH AND CASH EQUIVALENTS 2,224 233

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,804 ( 1,117 )

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,998 4,277

1 unchanged sentence

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid for income taxes $ 9,650 $ 7,845

Cash paid for interest $ 563 $ 610

10 unchanged sentences

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

The results of operations for the three months ended June 27, 2021 are not necessarily indicative of the results that may be expected for the full year.

The results of operations for the six months ended September 26, 2021 are not necessarily indicative of the results that may be expected for the full year.

References to fiscal 2020 refer to the fiscal year ended March 29, 2020, references to fiscal 2021 refer to the fiscal year ended March 28, 2021 and references to fiscal 2022 refer to the fiscal year ending April 3, 2022.

As compared to our normal 52-week fiscal years, fiscal 2022 will be a 53-week year, with the extra week to be recorded in our fourth quarter's results of operations.

Use of Estimates.

5 unchanged sentences

Note 2 — Acquisitions

Acquisition of C&L Aqua Professionals, Inc.

Acquisition of Southeast Water Systems LLC:

On September 20, 2021, we acquired substantially all the assets of Southeast Water Systems LLC, under the terms of an asset purchase agreement with Southeast Water Systems and its shareholders.

We paid $ 1.2 million at closing for the acquisition and may pay up to an additional $ 1.0 million over the next three years based on achieving certain goals.

Southeast Water Systems supplied and installed water treatment chemical equipment to its customers located primarily in Alabama, southern Georgia and the Florida panhandle.

The results of operations since the acquisition date, and the assets, including the goodwill associated with this acquisition, are included in our Water Treatment segment.

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 Southeast Water Systems 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).

Of the total $ 2.2 million purchase price, we allocated $ 0.4 million to finite-lived intangible assets, primarily customer relationships to be amortized over 10 years, and $ 0.1 million to property, plant and equipment.

The residual amount of $ 1.7 million was allocated to goodwill.

The goodwill recognized as a result of this acquisition is primarily attributable to strategic and synergistic benefits, as well as the assembled workforce.

Such goodwill is expected to be deductible for tax purposes.

Acquisitions of C&L Aqua Professionals, Inc.

and LC Blending, Inc.

2 unchanged sentences

(together, "C&L Aqua") under the terms of an asset purchase agreement among us, C&L Aqua and its shareholders.

We paid $ 16 million for the acquisition, using funds available under our revolving credit facility to fund the acquisition.

We paid $ 16 million for the acquisition.

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

8 unchanged sentences

(“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.

We paid $ 25 million for the acquisition.

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

6 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 three months ended June 27, 2021 and June 28, 2020:

Three months ended June 27, 2021

The following tables disaggregate external customer net sales by major revenue stream for the three and six months ended September 26, 2021 and September 27, 2020:

Three months ended September 26, 2021

(In thousands) Industrial Water

7 unchanged sentences

Total external customer sales $ 83,168 $ 62,111 $ 37,998 $ 183,277

Three months ended June 28, 2020

Three months ended September 27, 2020

(In thousands) Industrial Water

7 unchanged sentences

Total external customer sales $ 61,171 $ 49,540 $ 37,090 $ 147,801

Six months ended September 26, 2021

(In thousands) Industrial Water

Treatment Health and

Nutrition Total

Bulk / Distributed specialty products (1)

$ 25,506 $ 9,795 $ 61,004 $ 96,305

Manufactured, blended or repackaged products (2)

140,716 107,601 15,934 264,251

Other 2,796 953 213 3,962

Total external customer sales $ 169,018 $ 118,349 $ 77,151 $ 364,518

Six months ended September 27, 2020

(In thousands) Industrial Water

Treatment Health and

Nutrition Total

Bulk / Distributed specialty products (1)

$ 18,137 $ 8,233 $ 54,898 $ 81,268

Manufactured, blended or repackaged products (2)

112,997 80,344 14,231 207,572

Other 1,539 677 ( 83 ) 2,133

Total external customer sales $ 132,673 $ 89,254 $ 69,046 $ 290,973

(1) For our Industrial and Water Treatment segments, this line includes our bulk products that we do not modify in any way, but receive, store, and ship from our facilities, or direct ship to our customers in large quantities.

6 unchanged sentences

Basic and diluted EPS were calculated using the following:

Three Months Ended

June 27, 2021 June 28, 2020

Three Months Ended Six Months Ended

September 26, 2021 September 27, 2020 September 26, 2021 September 27, 2020

Weighted-average common shares outstanding—basic 20,986,542 21,055,782 21,010,422 21,053,022

14 unchanged sentences

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

As of June 27, 2021 and March 28, 2021, the assets held in a deferred compensation retirement plan were 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 on our balance sheet.

As of September 26, 2021 and March 28, 2021, the assets held in a deferred compensation retirement plan were 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 on our balance sheet.

The deferred compensation plan assets relate to contributions made to a non-qualified compensation plan on behalf of certain employees who are classified as “highly compensated employees” as determined by IRS guidelines.

1 unchanged sentence

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 June 27, 2021 and March 28, 2021.

(In thousands) June 27, 2021 March 28, 2021

T he following tables summarize the balances of assets and liabilities measured at fair value on a recurring basis as of September 26, 2021 and March 28, 2021.

(In thousands) September 26, 2021 March 28, 2021

Deferred compensation plan assets Level 1 $ 7,364 $ 5,946

4 unchanged sentences

Note 7 – Inventories

Inventories at June 27, 2021 and March 28, 2021 consisted of the following:

Inventories at September 26, 2021 and March 28, 2021 consisted of the following:

September 26,

2021 March 28,

3 unchanged sentences

Net inventory $ 70,338 $ 63,864

The first in, first out (“FIFO”) value of inventories accounted for under the last in, first out (“LIFO”) method was $ 51.0 million at June 27, 2021 and $ 46.8 million at March 28, 2021.

The first in, first out (“FIFO”) value of inventories accounted for under the last in, first out (“LIFO”) method was $ 57.0 million at September 26, 2021 and $ 46.8 million at March 28, 2021.

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

Note 8 – Goodwill and Intangible Assets

The carrying amount of goodwill was $ 70.8 million as of June 27, 2021 and $ 70.7 million as of March 28, 2021, of which $ 44.9 million was related to our Health and Nutrition segment, $ 19.3 million was related to our Water Treatment segment, and $ 6.5 million was related to our Industrial segment.

A summary of our intangible assets as of June 27, 2021 and March 28, 2021 is as follows:

June 27, 2021 March 28, 2021

The carrying amount of goodwill was $ 72.4 million as of September 26, 2021 and $ 70.7 million as of March 28, 2021, of which $ 44.9 million was related to our Health and Nutrition segment, $ 21.0 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 26, 2021 represents goodwill recorded in connection with the acquisition of the assets of Southeast Water Systems, LLC as discussed in Note 2.

A summary of our intangible assets as of September 26, 2021 and March 28, 2021 is as follows:

September 26, 2021 March 28, 2021

(In thousands) Gross

11 unchanged sentences

Note 9 – Debt

Debt at June 27, 2021 and March 28, 2021 consisted of the following:

Debt at September 26, 2021 and March 28, 2021 consisted of the following:

September 26,

2021 March 28,

10 unchanged sentences

income tax jurisdictions.

Our effective tax rate for the three months ended June 27, 2021 was 24.4 % and was 26.5 % for the three months ended June 28, 2020.

Our effective tax rate was approximately 26 % for both the six months ended September 26, 2021 and for the six months ended September 27, 2020.

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 June 27, 2021, 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 23 years, some of which include options to extend the lease for up to 10 years .

As of June 27, 2021, 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 was no t material for the three months ended June 27, 2021 and June 28, 2020.

Total lease expense was $ 0.7 million for both the three months ended June 27, 2021 and June 28, 2020.

As of September 26, 2021, 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 original lease terms of 1 year to 23 years, some of which include options to extend the lease for up to 10 years .

As of September 26, 2021, 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 was no t material for the three and six months ended September 26, 2021 and September 27, 2020.

Total lease expense was $ 0.7 million for both the three months ended September 26, 2021 and September 27, 2020, and was $ 1.4 million for both the six months ended September 26, 2021 and September 27, 2020.

Other information related to our operating leases was as follows:

June 27, 2021 March 28, 2021

September 26, 2021 March 28, 2021

Lease Term and Discount Rate

1 unchanged sentence

Weighted average discount rate 2.6 % 2.7 %

Maturities of lease liabilities as of June 27, 2021 were as follows:

Maturities of lease liabilities as of September 26, 2021 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 three months ended June 27, 2021:

The following table represents the restricted stock activity for the six months ended September 26, 2021:

Shares Weighted-

5 unchanged sentences

Unvested at end of period 227,736 $ 25.08

We recorded compensation expense related to performance share units and restricted stock of $ 0.6 million for the three months ended June 27, 2021 and $ 0.5 million for the three June 28, 2020.

We recorded compensation expense related to performance share units and restricted stock of $ 0.6 million and $ 1.2 million for the three and six months ended September 26, 2021, respectively.

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.

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

Restricted Stock Awards .

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 generally one year from the date of issuance, based on the market value on the date of grant.

As of June 27, 2021, there were 11,228 shares of restricted stock with an average grant date fair value of $ 25.60 outstanding under this program.

Compensation expense for both the three months ended June 27, 2021 and June 28, 2020 related to restricted stock awards to the Board was $ 0.1 million.

As part of their retainer, our non-employee directors receive restricted stock for their Board services.

The restricted stock awards are generally expensed over a one-year vesting period, based on the market value on the date of grant.

As of September 26, 2021, there were 9,282 shares of restricted stock with an average grant date fair value of $ 32.31 outstanding under this program.

Compensation expense for both the three months ended September 26, 2021 and September 27, 2020 related to restricted stock awards to the Board was $ 0.1 million.

Compensation expense for both the six months ended September 26, 2021 and September 27, 2020 related to restricted stock awards to the Board was $ 0.2 million.

Note 13 – Share Repurchase Program

Our Board has authorized the repurchase of up to 1,600,000 shares of our outstanding common stock for cash on the open market or in privately negotiated transactions subject to applicable securities laws and regulations.

Our Board has authorized the repurchase of up to 1.6 million shares of our outstanding common stock for cash on the open market or in privately negotiated transactions subject to applicable securities laws and regulations.

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 months ended June 27, 2021, we repurchased 100,954 shares at an aggregate purchase price of $ 3.4 million.

During the three months ended June 28, 2020, no shares were repurchased.

As of June 27, 2021, 450,552 shares remained available to be repurchased under the share repurchase program.

During the three months ended September 26, 2021, we repurchased 109,009 shares at an aggregate purchase price of $ 4.0 million.

During the six months ended September 26, 2021, we repurchased 209,963 shares at an aggregate purchase price of $ 7.4 million.

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

As of September 26, 2021, 341,543 shares remained available to be repurchased under the share repurchase program.

Note 14 – Segment Information

5 unchanged sentences

Segments are responsible for the sales, marketing and development of their products and services.

Other than our Health and Nutrition segment, the segments do not have separate accounting, administration, customer service or purchasing functions.

Other than our Health and Nutrition segment, the segments do not have separate customer service or purchasing functions.

We allocate certain corporate expenses to our operating segments.

4 unchanged sentences

Treatment Health and Nutrition Total

Three months ended June 27, 2021:

Three months ended September 26, 2021:

Sales $ 83,168 $ 62,111 $ 37,998 $ 183,277

2 unchanged sentences

Operating income 6,108 10,113 3,387 19,608

Three months ended June 28, 2020:

Three months ended September 27, 2020:

Sales $ 61,171 $ 49,540 $ 37,090 $ 147,801

2 unchanged sentences

Operating income 4,007 8,949 3,620 16,576

No significant changes to identifiable assets by segment occurred during the three months ended June 27, 2021.

Six months ended September 26, 2021:

Sales $ 169,018 $ 118,349 $ 77,151 $ 364,518

Gross profit 26,818 33,752 15,691 76,261

Selling, general and administrative expenses 12,697 14,467 7,371 34,535

Operating income 14,121 19,285 8,320 41,726

Six months ended September 27, 2020:

Sales $ 132,673 $ 89,254 $ 69,046 $ 290,973

Gross profit 22,893 25,861 15,019 63,773

Selling, general and administrative expenses 12,496 10,866 7,897 31,259

Operating income 10,397 14,995 7,122 32,514

No significant changes to identifiable assets by segment occurred during the six months ended September 26, 2021.

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