HAWKINS INC 10-Q

ITEM 1. FINANCIAL STATEMENTS HAWKINS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share data) January 1, 2023 April 3, 2022 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 6,146 $ 3,496 Trade accounts receivables, net 125,471 122,826 Inventories 101,581 94,985 Prepaid expenses and other current assets 7,050 6,431 Total current assets 240,248 227,738 PROPERTY, PLANT, AND EQUIPMENT: 333,781 304,055 Less accumulated depreciation 155,406 142,209 Net property, plant, and equipment 178,375 161,846 OTHER ASSETS: Right-of-use assets 10,551 10,606 Goodwill 77,401 77,401 Intangible assets, net of accumulated amortization 74,946 80,193 Deferred compensation plan asset 6,987 6,783 Other 5,496 2,761 Total other assets 175,381 177,744 Total assets $ 594,004 $ 567,328 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable — trade $ 50,573 $ 66,693 Accrued payroll and employee benefits 16,320 19,034 Income tax payable 1,801 39 Current portion of long-term debt 9,913 9,913 Short-term lease liability 1,689 1,657 Other current liabilities 4,584 4,130 Total current liabilities 84,880 101,466 LONG-TERM DEBT, LESS CURRENT PORTION 120,710 115,644 LONG-TERM LEASE LIABILITY 9,082 9,143 PENSION WITHDRAWAL LIABILITY 4,004 4,276 DEFERRED INCOME TAXES 24,297 23,422 DEFERRED COMPENSATION LIABILITY 8,384 8,402 OTHER LONG-TERM LIABILITIES 1,487 2,374 Total liabilities 252,844 264,727 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS’ EQUITY: Common stock; authorized: 60,000,000 shares of $ 0.01 par value; 20,850,454 and 20,889,777 shares issued and outstanding as of January 1, 2023 and April 3, 2022, respectively 209 209 Additional paid-in capital 43,388 46,717 Retained earnings 293,969 254,384 Accumulated other comprehensive income 3,594 1,291 Total shareholders’ equity 341,160 302,601 Total liabilities and shareholders’ equity $ 594,004 $ 567,328 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 Nine Months Ended January 1, 2023 December 26, 2021 January 1, 2023 December 26, 2021 Sales $ 219,218 $ 187,050 $ 706,953 $ 551,568 Cost of sales ( 182,947 ) ( 153,110 ) ( 577,559 ) ( 441,367 ) Gross profit 36,271 33,940 129,394 110,201 Selling, general and administrative expenses ( 21,004 ) ( 19,681 ) ( 59,727 ) ( 54,216 ) Operating income 15,267 14,259 69,667 55,985 Interest expense, net ( 1,546 ) ( 317 ) ( 3,858 ) ( 995 ) Other income (expense) 465 132 ( 744 ) 548 Income before income taxes 14,186 14,074 65,065 55,538 Income tax expense ( 3,453 ) ( 3,870 ) ( 16,637 ) ( 14,573 ) Net income $ 10,733 $ 10,204 $ 48,428 $ 40,965 Weighted average number of shares outstanding - basic 20,818,347 20,885,232 20,847,285 20,968,692 Weighted average number of shares outstanding - diluted 20,974,264 21,054,603 21,004,849 21,142,515 Basic earnings per share $ 0.52 $ 0.49 $ 2.32 $ 1.95 Diluted earnings per share $ 0.51 $ 0.48 $ 2.31 $ 1.94 Cash dividends declared per common share $ 0.1400 $ 0.1300 $ 0.4200 $ 0.3825 See accompanying notes to condensed consolidated financial statements. 2 HAWKINS, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (In thousands) Three Months Ended Nine Months Ended January 1, 2023 December 26, 2021 January 1, 2023 December 26, 2021 Net income $ 10,733 $ 10,204 $ 48,428 $ 40,965 Other comprehensive income, net of tax: Unrealized (loss) gain on interest rate swap ( 139 ) — 2,303 — Total comprehensive income $ 10,594 $ 10,204 $ 50,731 $ 40,965 See accompanying notes to condensed consolidated financial statements. 3 HAWKINS, INC. CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED) (In thousands, except share data) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity Shares Amount BALANCE — April 3, 2022 20,889,777 $ 209 $ 46,717 $ 254,384 $ 1,291 $ 302,601 Cash dividends declared and paid ($ 0.14 per share) — — — ( 2,958 ) — ( 2,958 ) Share-based compensation expense — — 595 — — 595 Vesting of restricted stock 102,860 1 ( 1 ) — — — Shares surrendered for payroll taxes ( 36,410 ) — ( 1,550 ) — — ( 1,550 ) ESPP shares issued 32,768 — 986 — — 986 Shares repurchased ( 181,657 ) ( 2 ) ( 6,555 ) — — ( 6,557 ) Other comprehensive income, net of tax — — — — 465 465 Net income — — — 19,695 — 19,695 BALANCE — July 3, 2022 20,807,338 $ 208 $ 40,192 $ 271,121 $ 1,756 $ 313,277 Cash dividends declared and paid ($ 0.14 per share) — — — ( 2,942 ) — ( 2,942 ) Share-based compensation expense — — 1,085 — — 1,085 Vesting of restricted stock 10,287 — — — — — ESPP shares issued — — 17 — — 17 Other comprehensive income, net of tax — — — — 1,977 1,977 Net income — — — 18,000 — 18,000 BALANCE — October 2, 2022 20,817,625 $ 208 $ 41,294 $ 286,179 $ 3,733 $ 331,414 Cash dividends declared and paid ($ 0.14 per share) — — — ( 2,943 ) — ( 2,943 ) Share-based compensation expense — — 1,084 — — 1,084 ESPP shares issued 32,829 1 1,010 — — 1,011 Other comprehensive loss, net of tax — — — — ( 139 ) ( 139 ) Net income — — — 10,733 — 10,733 BALANCE — January 1, 2023 20,850,454 $ 209 $ 43,388 $ 293,969 $ 3,594 $ 341,160 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 ($ 0.1225 per share) — — — ( 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 ($ 0.13 per share) — — — ( 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 Cash dividends declared and paid ($ 0.13 per share) — — — ( 2,745 ) — ( 2,745 ) Share-based compensation expense — — 1,046 — — 1,046 Shares repurchased ( 30,538 ) — ( 1,124 ) — — ( 1,124 ) Net income — — — 10,204 $ — 10,204 BALANCE — December 26, 2021 20,858,385 $ 209 $ 44,723 $ 246,762 $ — $ 291,694 See accompanying notes to condensed consolidated financial statements. 4 HAWKINS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Nine Months Ended January 1, 2023 December 26, 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 48,428 $ 40,965 Reconciliation to cash flows: Depreciation and amortization 20,373 17,859 Operating leases 1,442 1,416 Loss (Gain) on deferred compensation assets 744 ( 548 ) Stock compensation expense 2,764 2,707 Other 225 379 Changes in operating accounts providing (using) cash: Trade receivables ( 2,336 ) ( 10,847 ) Inventories ( 6,596 ) ( 12,311 ) Accounts payable ( 16,231 ) 6,094 Accrued liabilities ( 3,652 ) ( 1,589 ) Lease liabilities ( 1,453 ) ( 1,431 ) Income taxes 1,762 ( 635 ) Other ( 929 ) ( 3,350 ) Net cash provided by operating activities 44,541 38,709 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant, and equipment ( 32,307 ) ( 15,700 ) Acquisitions — ( 2,575 ) Other 352 230 Net cash used in investing activities ( 31,955 ) ( 18,045 ) CASH FLOWS FROM FINANCING ACTIVITIES: Cash dividends declared and paid ( 8,843 ) ( 8,101 ) New shares issued 2,014 889 Payroll taxes paid in exchange for shares withheld ( 1,550 ) ( 1,467 ) Shares repurchased ( 6,557 ) ( 8,545 ) Payments on revolving loan ( 40,000 ) ( 15,000 ) Proceeds from revolving loan borrowings 45,000 32,000 Net cash used in financing activities ( 9,936 ) ( 224 ) NET INCREASE IN CASH AND CASH EQUIVALENTS 2,650 20,440 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,496 2,998 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,146 $ 23,438 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for income taxes $ 14,847 $ 15,208 Cash paid for interest $ 3,345 $ 746 Noncash investing activities - capital expenditures in accounts payable $ 3,844 $ 1,018 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 April 3, 2022 , 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 nine months ended January 1, 2023 are not necessarily indicative of the results that may be expected for the full year. References to fiscal 2022 refer to the fiscal year ended April 3, 2022 and references to fiscal 2023 refer to the fiscal year ending April 2, 2023. 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 April 3, 2022 , previously filed with the SEC. There has been no significant change in our accounting policies since the end of fiscal 2022. Note 2 — Acquisitions Acquisition of NAPCO Chemical Company, Inc.: In the fourth quarter of fiscal 2022, we acquired substantially all the assets of NAPCO Chemical Company, Inc. ("NAPCO") for $ 19.0 million, under the terms of an asset purchase agreement with NAPCO and certain other parties thereto, to further the geographic reach of our Water Treatment segment. NAPCO manufactured and distributed water treatment chemicals from three locations in Texas. 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. Acquisition of Water and Waste Specialties, Inc.: In the third quarter of fiscal 2022, we acquired substantially all the assets of Water and Waste Specialties, Inc. for $ 1.4 million, under the terms of a purchase agreement with Water and Waste Specialties and its shareholders. Water and Waste Specialties was a water treatment chemical distribution company operating primarily in Alabama. 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. Acquisition of Southeast Water Systems LLC: In the second quarter of fiscal 2022, 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. 6 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 nine months ended January 1, 2023 and December 26, 2021: Three months ended January 1, 2023 (In thousands) Industrial Water Treatment Health and Nutrition Total Manufactured, blended or repackaged products (1) $ 91,658 $ 60,583 $ 11,935 $ 164,176 Distributed specialty products (2) — — 23,833 23,833 Bulk products (3) 20,364 6,649 — 27,013 Other 2,414 1,317 465 4,196 Total external customer sales $ 114,436 $ 68,549 $ 36,233 $ 219,218 Three months ended December 26, 2021 (In thousands) Industrial Water Treatment Health and Nutrition Total Manufactured, blended or repackaged products (1) $ 82,905 $ 44,241 $ 7,750 $ 134,896 Distributed specialty products (2) — — 29,082 29,082 Bulk products (3) 15,659 4,689 — 20,348 Other 1,990 826 ( 92 ) 2,724 Total external customer sales $ 100,554 $ 49,756 $ 36,740 $ 187,050 Nine months ended January 1, 2023 (In thousands) Industrial Water Treatment Health and Nutrition Total Manufactured, blended or repackaged products (1) $ 286,818 $ 208,112 $ 35,632 $ 530,562 Distributed specialty products (2) — — 83,599 83,599 Bulk products (3) 58,951 21,159 — 80,110 Other 7,316 4,256 1,110 12,682 Total external customer sales $ 353,085 $ 233,527 $ 120,341 $ 706,953 Nine months ended December 26, 2021 (In thousands) Industrial Water Treatment Health and Nutrition Total Manufactured, blended or repackaged products (1) $ 223,621 $ 151,842 $ 23,684 $ 399,147 Distributed specialty products (2) — — 90,086 90,086 Bulk products (3) 41,165 14,484 — 55,649 Other 4,786 1,779 121 6,686 Total external customer sales $ 269,572 $ 168,105 $ 113,891 $ 551,568 (1) 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. (2) This line includes non-manufactured distributed specialty products in our Health and Nutrition segment, which may be sold out of one of our facilities or direct shipped to our customers. (3) This line includes bulk products in our Industrial and Water Treatment segments 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. 7 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 Nine Months Ended January 01, 2023 December 26, 2021 January 01, 2023 December 26, 2021 Weighted-average common shares outstanding—basic 20,818,347 20,885,232 20,847,285 20,968,692 Dilutive impact of performance units and restricted stock 155,917 169,371 157,564 173,823 Weighted-average common shares outstanding—diluted 20,974,264 21,054,603 21,004,849 21,142,515 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). The carrying value of cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value because of the short-term nature of these instruments. Because of the variable-rate nature of our debt under our credit facility, our debt also approximates fair value. 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 an interest rate swap and assets held in a deferred compensation retirement plan. Both of these assets are classified as long-term assets on our balance sheet, with the portion of the deferred compensation retirement plan assets expected to be paid within twelve months classified as current assets. The fair value of the interest rate swap is 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. 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. The following tables summarize the balances of assets and liabilities measured at fair value on a recurring basis as of January 1, 2023 and April 3, 2022. 0 (In thousands) January 1, 2023 April 3, 2022 Assets Deferred compensation plan assets Level 1 $ 7,551 $ 7,038 Interest rate swap Level 2 $ 4,924 $ 1,769 8 Note 6 – Inventories Inventories at January 1, 2023 and April 3, 2022 consisted of the following: January 1, 2023 April 3, 2022 (In thousands) Inventory (FIFO basis) $ 135,618 $ 116,325 LIFO reserve ( 34,037 ) ( 21,340 ) Net inventory $ 101,581 $ 94,985 The first in, first out (“FIFO”) value of inventories accounted for under the last in, first out (“LIFO”) method was $ 104.7 million at January 1, 2023 and $ 83.7 million at April 3, 2022. The remainder of the inventory was valued and accounted for under the FIFO method. Note 7 – Goodwill and Intangible Assets The carrying amount of goodwill was $ 77.4 million as of January 1, 2023 and April 3, 2022, of which $ 44.9 million was related to our Health and Nutrition segment, $ 26.0 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 January 1, 2023 and April 3, 2022 is as follows: January 1, 2023 April 3, 2022 (In thousands) Gross Amount Accumulated Amortization Net Gross Amount Accumulated Amortization Net Finite-life intangible assets Customer relationships $ 109,644 $ ( 37,128 ) $ 72,516 $ 109,644 $ ( 32,399 ) $ 77,245 Trademarks and trade names 6,370 ( 5,167 ) 1,203 6,370 ( 4,746 ) 1,624 Other finite-life intangible assets 3,904 ( 3,904 ) — 3,904 ( 3,807 ) 97 Total finite-life intangible assets 119,918 ( 46,199 ) 73,719 119,918 ( 40,952 ) 78,966 Indefinite-life intangible assets 1,227 — 1,227 1,227 — 1,227 Total intangible assets $ 121,145 $ ( 46,199 ) $ 74,946 $ 121,145 $ ( 40,952 ) $ 80,193 Note 8 – Debt Debt at January 1, 2023 and April 3, 2022 consisted of the following: January 1, 2023 April 3, 2022 (In thousands) Senior secured revolving loan $ 131,000 $ 126,000 Less: unamortized debt issuance costs ( 377 ) ( 443 ) Total debt, net of debt issuance costs 130,623 125,557 Less: current portion of long-term debt ( 9,913 ) ( 9,913 ) Total long-term debt $ 120,710 $ 115,644 We were in compliance with all covenants of our credit agreement as of January 1, 2023. Note 9 – 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 March 31, 2019 are closed to examination by the Internal Revenue Service, and with few exceptions, state and local income tax jurisdictions. Our effective income tax rate was 26 % for both the nine months ended January 1, 2023 and the nine months ended December 26, 2021. The effective tax rate is impacted by projected levels of annual taxable income, permanent items, and state taxes. 9 Note 10 – Leases Lease Obligations. As of January 1, 2023, 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 22 years, some of which include options to extend the lease for up to 10 years . As of January 1, 2023, 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 nine months ended January 1, 2023 and December 26, 2021. Total lease expense was $ 0.8 million for the three months ended January 1, 2023 and $ 0.7 million for the three months ended December 26, 2021, and was $ 2.4 million for the nine months ended January 1, 2023 and $ 2.1 million for the nine months ended December 26, 2021. Other information related to our operating leases was as follows: January 1, 2023 April 3, 2022 Lease Term and Discount Rate Weighted average remaining lease term (years) 8.02 8.91 Weighted average discount rate 2.8 % 2.6 % Maturities of lease liabilities as of January 1, 2023 were as follows: (In thousands) Operating Leases Remaining fiscal 2023 $ 475 Fiscal 2024 1,850 Fiscal 2025 1,742 Fiscal 2026 1,598 Fiscal 2027 1,340 Thereafter 5,145 Total $ 12,150 Less: Interest ( 1,379 ) Present value of lease liabilities $ 10,771 10 Note 11 – 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 2023 and fiscal 2022. 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 76,863 shares in the aggregate for fiscal 2023. 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 nine months ended January 1, 2023: Shares Weighted- Average Grant Date Fair Value Unvested at beginning of period 214,478 $ 25.48 Granted 88,524 38.31 Vested ( 102,860 ) 18.69 Forfeited or expired ( 10,884 ) 34.68 Unvested at end of period 189,258 $ 34.64 We recorded compensation expense for both the three months ended January 1, 2023 and December 26, 2021 related to performance share units and restricted stock of $ 0.8 million. We recorded compensation expense for both the nine months ended January 1, 2023 and December 26, 2021 related to performance share units and restricted stock of $ 2.0 million. 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 January 1, 2023, there were 12,565 shares of restricted stock with an average grant date fair value of $ 38.98 outstanding under this program. Compensation expense for the three and nine months ended January 1, 2023 related to restricted stock awards to the Board was $ 0.1 million and $ 0.3 million, respectively. Compensation expense for the three and nine months ended December 26, 2021 related to restricted stock awards to the Board was $ 0.1 million and $ 0.2 million, respectively. Note 12 – Share Repurchase Program On August 4, 2022, our Board increased the number of shares authorized to be purchased from 1.6 million to 2.6 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 January 1, 2023, no shares were repurchased, and during the nine months ended January 1, 2023, we repurchased 181,657 shares at an aggregate purchase price of $ 6.6 million. During the three months ended December 26, 2021, we repurchased 30,538 shares at an aggregate purchase price of $ 1.1 million, and during the nine months ended December 26, 2021, we repurchased 240,501 shares at an aggregate purchase price of $ 8.5 million. As of January 1, 2023, 1,129,348 shares remained available to be repurchased under the share repurchase program. 11 Note 13 – 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 April 3, 2022 . 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. 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 January 1, 2023: Sales $ 114,436 $ 68,549 $ 36,233 $ 219,218 Gross profit 15,994 13,268 7,009 36,271 Selling, general, and administrative expenses 7,978 9,003 4,023 21,004 Operating income 8,016 4,265 2,986 15,267 Three months ended December 26, 2021: Sales $ 100,554 $ 49,756 $ 36,740 $ 187,050 Gross profit 15,303 11,103 7,534 33,940 Selling, general, and administrative expenses 7,367 8,254 4,060 19,681 Operating income 7,936 2,849 3,474 14,259 Nine months ended January 1, 2023: Sales $ 353,085 $ 233,527 $ 120,341 $ 706,953 Gross profit 53,716 52,725 22,953 129,394 Selling, general and administrative expenses 21,254 26,786 11,687 59,727 Operating income 32,462 25,939 11,266 69,667 Nine months ended December 26, 2021: Sales $ 269,572 $ 168,105 $ 113,891 $ 551,568 Gross profit 42,121 44,855 23,225 110,201 Selling, general and administrative expenses 20,064 22,721 11,431 54,216 Operating income 22,057 22,134 11,794 55,985 No significant changes to identifiable assets by segment occurred during the nine months ended January 1, 2023. 12