HAWKINS INC 10-Q

ITEM 1. FINANCIAL STATEMENTS HAWKINS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share data) September 26, 2021 March 28, 2021 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 6,802 $ 2,998 Trade accounts receivables, net 90,057 90,603 Inventories 70,338 63,864 Income taxes receivable — 175 Prepaid expenses and other current assets 2,478 5,367 Total current assets 169,675 163,007 PROPERTY, PLANT, AND EQUIPMENT: 307,021 300,404 Less accumulated depreciation 163,910 155,792 Net property, plant, and equipment 143,111 144,612 OTHER ASSETS: Right-of-use assets 11,045 11,630 Goodwill 72,417 70,720 Intangible assets, net of accumulated amortization 73,666 76,368 Other 7,890 6,213 Total other assets 165,018 164,931 Total assets $ 477,804 $ 472,550 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable — trade $ 43,004 $ 37,313 Accrued payroll and employee benefits 12,417 18,048 Income tax payable 877 — Current portion of long-term debt 9,907 9,907 Short-term lease liability 1,625 1,587 Container deposits 1,528 1,452 Other current liabilities 2,191 2,155 Total current liabilities 71,549 70,462 LONG-TERM DEBT, LESS CURRENT PORTION 73,891 88,845 LONG-TERM LEASE LIABILITY 9,553 10,231 PENSION WITHDRAWAL LIABILITY 4,455 4,631 DEFERRED INCOME TAXES 24,445 24,445 DEFERRED COMPENSATION LIABILITY 8,289 7,322 OTHER LONG-TERM LIABILITIES 1,309 1,368 Total liabilities 193,491 207,304 COMMITMENTS AND CONTINGENCIES — — SHAREHOLDERS’ EQUITY: Common stock; authorized: 60,000,000 shares of $ 0.01 par value; 20,888,923 and 20,969,746 shares issued and outstanding as of September 26, 2021 and March 28, 2021, respectively 209 210 Additional paid-in capital 44,801 51,138 Retained earnings 239,303 213,898 Total shareholders’ equity 284,313 265,246 Total liabilities and shareholders’ equity $ 477,804 $ 472,550 See accompanying notes to condensed consolidated financial statements. 1 HAWKINS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except share and per-share data) Three Months Ended Six Months Ended September 26, 2021 September 27, 2020 September 26, 2021 September 27, 2020 Sales $ 183,277 $ 147,801 $ 364,518 $ 290,973 Cost of sales ( 145,990 ) ( 115,004 ) ( 288,257 ) ( 227,200 ) Gross profit 37,287 32,797 76,261 63,773 Selling, general and administrative expenses ( 17,679 ) ( 16,221 ) ( 34,535 ) ( 31,259 ) Operating income 19,608 16,576 41,726 32,514 Interest expense, net ( 329 ) ( 339 ) ( 678 ) ( 719 ) Other income 184 327 416 804 Income before income taxes 19,463 16,564 41,464 32,599 Income tax expense ( 5,330 ) ( 4,374 ) ( 10,703 ) ( 8,621 ) Net income $ 14,133 $ 12,190 $ 30,761 $ 23,978 Weighted average number of shares outstanding - basic 20,986,542 21,055,782 21,010,422 21,053,022 Weighted average number of shares outstanding - diluted 21,140,087 21,245,762 21,168,809 21,268,562 Basic earnings per share $ 0.67 $ 0.58 $ 1.46 $ 1.14 Diluted earnings per share $ 0.67 $ 0.57 $ 1.45 $ 1.13 Cash dividends declared per common share $ 0.13000 $ 0.11625 $ 0.25250 $ 0.23250 See accompanying notes to condensed consolidated financial statements. 2 HAWKINS, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (In thousands) Three Months Ended Six Months Ended September 26, 2021 September 27, 2020 September 26, 2021 September 27, 2020 Net income $ 14,133 $ 12,190 $ 30,761 $ 23,978 Other comprehensive loss, net of tax: Unrealized gain on interest rate swap — 39 — 29 Total comprehensive income $ 14,133 $ 12,229 $ 30,761 $ 24,007 See accompanying notes to condensed consolidated financial statements. 3 HAWKINS, INC. CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands, except share data) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity Shares Amount BALANCE — March 28, 2021 20,969,746 $ 210 $ 51,138 $ 213,898 $ — $ 265,246 Cash dividends declared and paid — — — ( 2,600 ) — ( 2,600 ) Share-based compensation expense — — 799 — — 799 Vesting of restricted stock 123,002 1 ( 1 ) — — — Shares surrendered for payroll taxes ( 45,390 ) — ( 1,467 ) — — ( 1,467 ) Shares repurchased ( 100,954 ) ( 1 ) ( 3,400 ) — — ( 3,401 ) Net income — — — 16,628 — 16,628 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 Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity Shares Amount BALANCE — March 29, 2020 21,024,458 $ 211 $ 50,405 $ 182,947 $ ( 79 ) $ 233,484 Cash dividends declared and paid — — — ( 2,479 ) — ( 2,479 ) Share-based compensation expense — — 700 — — 700 Vesting of restricted stock 10,526 — — — — — Shares surrendered for payroll taxes ( 3,314 ) — ( 54 ) — — ( 54 ) Other comprehensive loss, net of tax — — — — ( 10 ) ( 10 ) Net income — — — 11,788 — 11,788 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. 4 HAWKINS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Six Months Ended September 26, 2021 September 27, 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 30,761 $ 23,978 Reconciliation to cash flows: Depreciation and amortization 11,889 11,065 Operating leases 948 963 Gain on deferred compensation assets ( 416 ) ( 804 ) Stock compensation expense 1,661 1,386 Other 54 135 Changes in operating accounts providing (using) cash: Trade receivables 596 ( 5,811 ) Inventories ( 6,458 ) ( 8,004 ) Accounts payable 5,116 ( 1,421 ) Accrued liabilities ( 5,392 ) ( 2,320 ) Lease liabilities ( 991 ) ( 963 ) Income taxes 1,053 792 Other 1,261 1,142 Net cash provided by operating activities 40,082 20,138 CASH FLOWS FROM INVESTING ACTIVITIES: 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 ) CASH FLOWS FROM FINANCING ACTIVITIES: Cash dividends declared and paid ( 5,356 ) ( 4,959 ) New shares issued 889 773 Shares surrendered for payroll taxes ( 1,467 ) ( 54 ) Shares repurchased ( 7,421 ) — Net (payments on) proceeds from revolving loan ( 15,000 ) 16,000 Net cash (used in) provided by financing activities ( 28,355 ) 11,760 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,804 ( 1,117 ) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,998 4,277 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,802 $ 3,160 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for income taxes $ 9,650 $ 7,845 Cash paid for interest $ 563 $ 610 Noncash investing activities - capital expenditures in accounts payable $ 1,076 $ 191 See accompanying notes to condensed consolidated financial statements. 5 HAWKINS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 – Summary of Significant Accounting Policies Basis of Presentation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and, accordingly, do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements and footnotes included in our Annual Report on Form 10-K for the fiscal year ended March 28, 2021 , previously filed with the Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly our financial position and the results of our operations and cash flows for the periods presented. All adjustments made to the interim condensed consolidated financial statements were of a normal recurring nature. All significant intercompany accounts and transactions have been eliminated in consolidation. 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. The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, particularly receivables, inventories, property, plant and equipment, right-of-use assets, goodwill, intangibles, accrued expenses, short-term and long-term lease liability, income taxes and related accounts and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Accounting Policies. The accounting policies we follow are set forth in Note 1 – Nature of Business and Significant Accounting Policies to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended March 28, 2021 , previously filed with the SEC. There has been no significant change in our accounting policies since the end of fiscal 2021. Note 2 — Acquisitions 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. : In the fourth quarter of fiscal 2021, we acquired substantially all the assets of C&L Aqua Professionals, Inc. and LC Blending, Inc. (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. C&L Aqua was a water treatment chemical distribution company operating primarily in Louisiana. 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. 6 Acquisition of Property : In the third quarter of fiscal 2021, 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 added 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 our customers. Acquisition of American Development Corporation of Tennessee, Inc. : In the second quarter of fiscal 2021, we acquired substantially all the assets of American Development Corporation of Tennessee, Inc. (“ADC”) under the terms of an asset purchase agreement among us, ADC and its shareholders. We paid $ 25 million for the acquisition. ADC was a water treatment chemical distribution company operating primarily in Tennessee, Georgia and Kentucky. 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. Note 3 - Revenue Our revenue arrangements generally consist of a single performance obligation to transfer promised goods or services. We disaggregate revenues from contracts with customers by operating segments as well as types of products sold. Reporting by operating segment is pertinent to understanding our revenues, as it aligns to how we review the financial performance of our operations. 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 26, 2021 and September 27, 2020: Three months ended September 26, 2021 (In thousands) Industrial Water Treatment Health and Nutrition Total Bulk / Distributed specialty products (1) $ 13,663 $ 5,242 $ 30,062 $ 48,967 Manufactured, blended or repackaged products (2) 68,150 56,373 7,883 132,406 Other 1,355 496 53 1,904 Total external customer sales $ 83,168 $ 62,111 $ 37,998 $ 183,277 Three months ended September 27, 2020 (In thousands) Industrial Water Treatment Health and Nutrition Total Bulk / Distributed specialty products (1) $ 9,313 $ 4,358 $ 28,953 $ 42,624 Manufactured, blended or repackaged products (2) 51,155 44,838 8,133 104,126 Other 703 344 4 1,051 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 7 (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. For our Health and Nutrition segment, this line includes our non-manufactured distributed specialty products, which may be sold out of one of our facilities or direct shipped to our customers. (2) For our Industrial and Water Treatment segments, this line includes our non-bulk specialty products that we either manufacture, blend, repackage, resell in their original form, or direct ship to our customers in smaller quantities, and services we provide for our customers. For our Health and Nutrition segment, this line includes products manufactured, processed or repackaged in our facility and/or with our equipment. Note 4 – Earnings per Share Basic earnings per share (“EPS”) is computed by dividing net earnings by the weighted-average number of common shares outstanding. Diluted EPS includes the dilutive impact of incremental shares assumed to be issued as performance units and restricted stock. Basic and diluted EPS were calculated using the following: 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 Dilutive impact of performance units and restricted stock 153,545 189,980 158,387 215,540 Weighted-average common shares outstanding—diluted 21,140,087 21,245,762 21,168,809 21,268,562 For each of the periods presented, there were no shares excluded from the calculation of weighted-average common shares for diluted EPS. Note 5 – Fair Value Measurements Our financial assets and liabilities are measured at fair value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We classify the inputs used to measure fair value into the following hierarchy: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable or can be corroborated by observable market data for the asset or liability. Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity. These fair values are determined using pricing models for which the assumptions utilize management’s estimates or market participant assumptions. Assets and Liabilities Measured at Fair Value on a Recurring Basis. The fair value hierarchy requires the use of observable market data when available. In instances where inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability. Our financial assets that are measured at fair value on a recurring basis are assets held in a deferred compensation retirement plan. 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. The assets are part of a rabbi trust and the funds are held in mutual funds. The fair value of the deferred compensation is based on the quoted market prices for the mutual funds at the end of the period. 8 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. 0 (In thousands) September 26, 2021 March 28, 2021 Assets Deferred compensation plan assets Level 1 $ 7,364 $ 5,946 Note 6– Assets Held for Sale Included in assets held for sale as of March 28, 2021 was $ 0.7 million for an office building in St. Louis, Missouri which was utilized in the administration of our Industrial segment and $ 0.2 million for a water treatment branch located in Eldridge, Iowa, which has been relocated to another owned facility. Both were sold in the first quarter of fiscal 2022. Note 7 – Inventories Inventories at September 26, 2021 and March 28, 2021 consisted of the following: September 26, 2021 March 28, 2021 (In thousands) Inventory (FIFO basis) $ 80,682 $ 69,438 LIFO reserve ( 10,344 ) ( 5,574 ) 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 $ 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 $ 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 Amount Accumulated Amortization Net Gross Amount Accumulated Amortization Net Finite-life intangible assets Customer relationships $ 100,008 $ ( 29,377 ) $ 70,631 $ 99,588 $ ( 26,522 ) $ 73,066 Trademarks and trade names 6,210 ( 4,505 ) 1,705 6,210 ( 4,275 ) 1,935 Other finite-life intangible assets 3,843 ( 3,740 ) 103 3,833 ( 3,693 ) 140 Total finite-life intangible assets 110,061 ( 37,622 ) 72,439 109,631 ( 34,490 ) 75,141 Indefinite-life intangible assets 1,227 — 1,227 1,227 — 1,227 Total intangible assets $ 111,288 $ ( 37,622 ) $ 73,666 $ 110,858 $ ( 34,490 ) $ 76,368 9 Note 9 – Debt Debt at September 26, 2021 and March 28, 2021 consisted of the following: September 26, 2021 March 28, 2021 (In thousands) Senior secured revolving loan $ 84,000 $ 99,000 Less: unamortized debt issuance costs ( 202 ) ( 248 ) Total debt, net of debt issuance costs 83,798 98,752 Less: current portion of long-term debt ( 9,907 ) ( 9,907 ) Total long-term debt $ 73,891 $ 88,845 Note 10 – Income Taxes We are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The tax years prior to our fiscal year ended April 1, 2018 are closed to examination by the Internal Revenue Service, and with few exceptions, state and local income tax jurisdictions. 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. Note 11 – Leases Lease Obligations. 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: September 26, 2021 March 28, 2021 Lease Term and Discount Rate Weighted average remaining lease term (years) 9.40 9.73 Weighted average discount rate 2.6 % 2.7 % Maturities of lease liabilities as of September 26, 2021 were as follows: (In thousands) Operating Leases Remaining fiscal 2022 $ 866 Fiscal 2023 1,713 Fiscal 2024 1,360 Fiscal 2025 1,305 Fiscal 2026 1,251 Thereafter 6,280 Total $ 12,775 Less: Interest ( 1,597 ) Present value of lease liabilities $ 11,178 10 Note 12 – Share-Based Compensation Performance-Based Restricted Stock Units . Our Board of Directors (the “Board”) approved a performance-based equity compensation arrangement for our executive officers during the first quarters of each of fiscal 2022 and fiscal 2021. These performance-based arrangements provide for the grant of performance-based restricted stock units that represent a possible future issuance of restricted shares of our common stock based on a pre-tax income target for the applicable fiscal year. The actual number of restricted shares to be issued to each executive officer is determined when our final financial information becomes available after the applicable fiscal year and will be between zero shares and 88,524 shares in the aggregate for fiscal 2022. The restricted shares issued, if any, will fully vest approximately two years after the last day of the fiscal year on which the performance is based. 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 26, 2021: Shares Weighted- Average Grant Date Fair Value Unvested at beginning of period 239,120 $ 17.94 Granted 111,618 31.74 Vested ( 123,002 ) 17.25 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 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 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 1.6 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 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. 11 Note 14 – Segment Information We have three reportable segments: Industrial, Water Treatment, and Health and Nutrition. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in our Annual Report on Form 10-K for the fiscal year ended March 28, 2021 . We evaluate performance based on profit or loss from operations before income taxes not including nonrecurring gains and losses. Reportable segments are defined primarily by product and type of customer. 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 customer service or purchasing functions. We allocate certain corporate expenses to our operating segments. There are no intersegment sales and no operating segments have been aggregated. No single customer’s revenues amounted to 10% or more of our total revenue. Sales are primarily within the United States and all assets are located within the United States. (In thousands) Industrial Water Treatment Health and Nutrition Total Three months ended September 26, 2021: Sales $ 83,168 $ 62,111 $ 37,998 $ 183,277 Gross profit 12,564 17,518 7,205 37,287 Selling, general, and administrative expenses 6,456 7,405 3,818 17,679 Operating income 6,108 10,113 3,387 19,608 Three months ended September 27, 2020: Sales $ 61,171 $ 49,540 $ 37,090 $ 147,801 Gross profit 10,436 14,522 7,839 32,797 Selling, general, and administrative expenses 6,429 5,573 4,219 16,221 Operating income 4,007 8,949 3,620 16,576 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. 12