What changed in this filing

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Item 1. Financial Statements

2023-08-02 compared with 2023-02-01 · 52 added, 160 removed, 283 unchanged (43% of the section changed)

28 unchanged sentences

Current portion of long-term debt 9,913 9,913

Short-term lease liability 1,689 1,657

Other current liabilities 6,518 6,645

11 unchanged sentences

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

20,942,857 and 20,850,454 shares issued and outstanding as of July 2, 2023 and April 2, 2023, respectively

Additional paid-in capital 44,409 44,443

7 unchanged sentences

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

Three Months Ended Nine Months Ended

2023 December 26,

2021 January 1,

2023 December 26,

Three Months Ended

Sales $ 251,120 $ 246,543

17 unchanged sentences

(In thousands)

Three Months Ended Nine Months Ended

2023 December 26,

2021 January 1,

2023 December 26,

Three Months Ended

Net income $ 23,430 $ 19,695

Other comprehensive income, net of tax:

Unrealized (loss) gain on interest rate swap ( 139 ) — 2,303 —

Unrealized gain on interest rate swap 749 465

Total comprehensive income $ 24,179 $ 20,160

15 unchanged sentences

ESPP shares issued 35,281 — 1,147 — — 1,147

Shares repurchased ( 181,657 ) ( 2 ) ( 6,555 ) — — ( 6,557 )

Other comprehensive income, net of tax — — — — 749 749

1 unchanged sentence

BALANCE — July 2, 2023 20,942,857 $ 209 $ 44,409 $ 322,694 $ 3,689 $ 371,001

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

3 unchanged sentences

Shares Amount

BALANCE — March 28, 2021 20,969,746 $ 210 $ 51,138 $ 213,898 $ — $ 265,246

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)

3 unchanged sentences

Shares surrendered for payroll taxes ( 36,410 ) — ( 1,550 ) — — ( 1,550 )

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 32,768 — 986 — — 986

Shares repurchased ( 181,657 ) ( 2 ) ( 6,555 ) — — ( 6,557 )

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 )

Other comprehensive income, net of tax — — — — 465 465

Net income — — — 19,695 — 19,695

BALANCE — December 26, 2021 20,858,385 $ 209 $ 44,723 $ 246,762 $ — $ 291,694

BALANCE — July 3, 2022 20,807,338 $ 208 $ 40,192 $ 271,121 $ 1,756 $ 313,277

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Nine Months Ended

2023 December 26,

Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

3 unchanged sentences

Operating leases 534 476

Loss (Gain) on deferred compensation assets 744 ( 548 )

(Gain) loss on deferred compensation assets ( 337 ) 763

Stock compensation expense 959 595

Other 225 379

Changes in operating accounts providing (using) cash:

6 unchanged sentences

Other 2,300 1,466

Net cash provided by operating activities 44,541 38,709

Net cash provided by (used in) operating activities 34,866 ( 9,395 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property, plant, and equipment ( 7,873 ) ( 11,640 )

Acquisitions — ( 2,575 )

Other 352 230

Net cash used in investing activities ( 7,829 ) ( 11,527 )

6 unchanged sentences

Proceeds from revolving loan borrowings — 40,000

Net cash used in financing activities ( 9,936 ) ( 224 )

NET INCREASE IN CASH AND CASH EQUIVALENTS 2,650 20,440

Net cash (used in) provided by financing activities ( 27,553 ) 23,421

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 516 ) 2,499

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,566 3,496

1 unchanged sentence

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid for income taxes $ 14,847 $ 15,208

Cash paid for interest $ 1,221 $ 721

10 unchanged sentences

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.

The results of operations for the three months ended July 2, 2023 are not necessarily indicative of the results that may be expected for the full year.

References to fiscal 2023 refer to the fiscal year ended April 2, 2023 and references to fiscal 2024 refer to the fiscal year ending March 31, 2024.

Use of Estimates.

4 unchanged sentences

There has been no significant change in our accounting policies since the end of fiscal 2023.

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.

Note 2 — Asset Sales

Sale of bleach packaging assets:

In the fourth quarter of fiscal 2023, we sold certain assets in our Industrial segment related to our consumer bleach packaging business for $ 7 million.

These assets were not core to our Industrial segment operations, where we tend to focus our manufacturing operations on bulk products.

The assets sold included plant equipment, inventory and intangible assets, all related to the packaging of bleach.

We realized a gain of $ 3 million on this sale, which has been recorded within selling, general and administrative expenses.

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 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

The following tables disaggregate external customer net sales by major revenue stream for the three months ended July 2, 2023 and July 3, 2022:

Three months ended July 2, 2023

(In thousands) Industrial Water

9 unchanged sentences

Total external customer sales $ 120,873 $ 93,651 $ 36,596 $ 251,120

Nine months ended December 26, 2021

Three months ended July 3, 2022

(In thousands) Industrial Water

17 unchanged sentences

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

Three Months Ended

July 02, 2023 July 03, 2022

Weighted-average common shares outstanding—basic 20,907,724 20,908,823

17 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 January 1, 2023 and April 3, 2022.

(In thousands) January 1, 2023 April 3, 2022

The following tables summarize the balances of assets and liabilities measured at fair value on a recurring basis as of July 2, 2023 and April 2, 2023.

(In thousands) July 2, 2023 April 2, 2023

Deferred compensation plan assets Level 1 $ 9,454 $ 7,659

1 unchanged sentence

Note 6 – Inventories

Inventories at January 1, 2023 and April 3, 2022 consisted of the following:

Inventories at July 2, 2023 and April 2, 2023 consisted of the following:

2023 April 2,

3 unchanged sentences

Net inventory $ 76,938 $ 88,777

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 first in, first out (“FIFO”) value of inventories accounted for under the last in, first out (“LIFO”) method was $ 90.8 million at July 2, 2023 and $ 101.4 million at April 2, 2023.

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

The carrying amount of goodwill was $ 77.4 million as of July 2, 2023 and April 2, 2023, 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 July 2, 2023 and April 2, 2023 is as follows:

July 2, 2023 April 2, 2023

(In thousands) Gross

6 unchanged sentences

Trademarks and trade names 6,370 ( 5,367 ) 1,003 6,370 ( 5,267 ) 1,103

Other finite-life intangible assets 3,904 ( 3,904 ) — 3,904 ( 3,807 ) 97

Total finite-life intangible assets 115,477 ( 45,313 ) 70,164 115,477 ( 43,644 ) 71,833

2 unchanged sentences

Note 8 – Debt

Debt at January 1, 2023 and April 3, 2022 consisted of the following:

Debt at July 2, 2023 and April 2, 2023 consisted of the following:

2023 April 2,

5 unchanged sentences

Total long-term debt $ 78,353 $ 101,731

We were in compliance with all covenants of our credit agreement as of January 1, 2023.

We were in compliance with all covenants of our credit agreement as of July 2, 2023.

Note 9 – Income Taxes

2 unchanged sentences

The tax years prior to our fiscal year ended March 29, 2020 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.

Our effective income tax rate was 26 % for the three months ended July 2, 2023, compared to 25 % for the three months ended July 3, 2022.

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

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

Interest ( 1,379 )

Present value of lease liabilities $ 10,771

Note 10 – Share-Based Compensation

5 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 nine months ended January 1, 2023:

The following table represents the restricted stock activity for the three months ended July 2, 2023:

Shares Weighted-

4 unchanged sentences

Vested ( 105,600 ) 31.74

Forfeited or expired ( 10,884 ) 34.68

Unvested at end of period 145,477 $ 40.33

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.

We recorded compensation expense related to performance share units and restricted stock of $ 0.7 million for the three months ended July 2, 2023 and $ 0.4 million for the three months ended July 3, 2022.

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

2 unchanged sentences

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.

As of July 2, 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 both the three months ended July 2, 2023 and July 3, 2022 related to restricted stock awards to the Board was $ 0.1 million.

Note 11 – 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.

Our Board had authorized the repurchase of up to 2.6 million shares of our outstanding common shares.

The shares may be repurchased 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.

During the three months ended July 2, 2023, no shares were repurchased, and during the three months ended July 3, 2022, we repurchased 181,657 shares at an aggregate purchase price of $ 6.6 million.

As of July 2, 2023, 1,129,348 shares remained available to be repurchased under the share repurchase program.

Note 12 – Segment Information

11 unchanged sentences

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:

Three months ended July 2, 2023:

Sales $ 120,873 $ 93,651 $ 36,596 $ 251,120

2 unchanged sentences

Operating income 12,731 17,282 2,474 32,487

Nine months ended December 26, 2021:

Three months ended July 3, 2022:

Sales $ 124,710 $ 78,490 $ 43,343 $ 246,543

2 unchanged sentences

Operating income 13,624 10,252 3,988 27,864

No significant changes to identifiable assets by segment occurred during the nine months ended January 1, 2023.

No significant changes to identifiable assets by segment occurred during the three months ended July 2, 2023.

Note 13 – Subsequent Events

In July 2023, we acquired substantially all the assets of EcoTech Enterprises, Inc.

("EcoTech") for $ 3.4 million, under the terms of an asset purchase agreement with EcoTech and its shareholders.

EcoTech is a manufacturer and distributor of water treatment chemicals serving customers throughout Arkansas and surrounding states.

The results of operations and the assets, including goodwill associated with this acquisition, if any, 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