HAWKINS INC 10-Q

ITEM 1. FINANCIAL STATEMENTS HAWKINS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share data) October 1, 2023 April 2, 2023 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 10,974 $ 7,566 Trade accounts receivables, net 124,813 129,252 Inventories 68,500 88,777 Prepaid expenses and other current assets 2,966 6,449 Total current assets 207,253 232,044 PROPERTY, PLANT, AND EQUIPMENT: 361,362 344,753 Less accumulated depreciation 168,504 158,950 Net property, plant, and equipment 192,858 185,803 OTHER ASSETS: Right-of-use assets 11,323 10,199 Goodwill 77,401 77,401 Intangible assets, net of accumulated amortization 71,491 73,060 Deferred compensation plan asset 8,917 7,367 Other 6,054 4,661 Total other assets 175,186 172,688 Total assets $ 575,297 $ 590,535 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable — trade $ 61,192 $ 53,705 Accrued payroll and employee benefits 12,416 17,279 Income tax payable 4,319 3,329 Current portion of long-term debt 9,913 9,913 Other current liabilities 6,622 6,645 Total current liabilities 94,462 90,871 LONG-TERM DEBT, LESS CURRENT PORTION 49,775 101,731 LONG-TERM LEASE LIABILITY 9,522 8,687 PENSION WITHDRAWAL LIABILITY 3,726 3,912 DEFERRED INCOME TAXES 24,190 23,800 DEFERRED COMPENSATION LIABILITY 10,317 9,343 OTHER LONG-TERM LIABILITIES 649 2,175 Total liabilities 192,641 240,519 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS’ EQUITY: Common stock; authorized: 60,000,000 shares of $ 0.01 par value; 20,787,626 and 20,850,454 shares issued and outstanding as of October 1, 2023 and April 2, 2023, respectively 208 209 Additional paid-in capital 35,918 44,443 Retained earnings 342,535 302,424 Accumulated other comprehensive income 3,995 2,940 Total shareholders’ equity 382,656 350,016 Total liabilities and shareholders’ equity $ 575,297 $ 590,535 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 October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022 Sales $ 236,526 $ 241,192 $ 487,646 $ 487,735 Cost of sales ( 182,640 ) ( 194,818 ) ( 381,769 ) ( 394,612 ) Gross profit 53,886 46,374 105,877 93,123 Selling, general and administrative expenses ( 20,895 ) ( 19,838 ) ( 40,399 ) ( 38,723 ) Operating income 32,991 26,536 65,478 54,400 Interest expense, net ( 717 ) ( 1,383 ) ( 1,865 ) ( 2,312 ) Other (expense) income ( 289 ) ( 446 ) 48 ( 1,209 ) Income before income taxes 31,985 24,707 63,661 50,879 Income tax expense ( 8,769 ) ( 6,707 ) ( 17,015 ) ( 13,184 ) Net income $ 23,216 $ 18,000 $ 46,646 $ 37,695 Weighted average number of shares outstanding - basic 20,903,690 20,814,686 20,905,707 20,861,754 Weighted average number of shares outstanding - diluted 21,026,428 20,956,897 21,034,153 21,004,454 Basic earnings per share $ 1.11 $ 0.86 $ 2.23 $ 1.81 Diluted earnings per share $ 1.10 $ 0.86 $ 2.22 $ 1.79 Cash dividends declared per common share $ 0.16 $ 0.14 $ 0.31 $ 0.28 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 October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022 Net income $ 23,216 $ 18,000 $ 46,646 $ 37,695 Other comprehensive income, net of tax: Unrealized gain on interest rate swap 306 1,977 1,055 2,442 Total comprehensive income $ 23,522 $ 19,977 $ 47,701 $ 40,137 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 2, 2023 20,850,454 $ 209 $ 44,443 $ 302,424 $ 2,940 $ 350,016 Cash dividends declared and paid ($ 0.15 per share) — — — ( 3,160 ) — ( 3,160 ) Share-based compensation expense — — 959 — — 959 Vesting of restricted stock 105,600 1 ( 1 ) — — — Shares surrendered for payroll taxes ( 48,478 ) ( 1 ) ( 2,139 ) — — ( 2,140 ) ESPP shares issued 35,281 — 1,147 — — 1,147 Other comprehensive income, net of tax — — — — 749 749 Net income — — — 23,430 — 23,430 BALANCE — July 2, 2023 20,942,857 $ 209 $ 44,409 $ 322,694 $ 3,689 $ 371,001 Cash dividends declared and paid ($ 0.16 per share) — — — ( 3,375 ) — ( 3,375 ) Share-based compensation expense — — 1,260 — — 1,260 Vesting of restricted stock 12,565 — — — — — Shares repurchased ( 167,796 ) ( 1 ) ( 9,751 ) — — ( 9,752 ) Other comprehensive income, net of tax — — — — 306 306 Net income — — — 23,216 — 23,216 BALANCE — October 1, 2023 20,787,626 $ 208 $ 35,918 $ 342,535 $ 3,995 $ 382,656 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 See accompanying notes to condensed consolidated financial statements. 4 HAWKINS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Six Months Ended October 1, 2023 October 2, 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 46,646 $ 37,695 Reconciliation to cash flows: Depreciation and amortization 14,506 13,371 Operating leases 1,115 945 (Gain) loss on deferred compensation assets ( 48 ) 1,208 Stock compensation expense 2,219 1,680 Other ( 34 ) 187 Changes in operating accounts providing (using) cash: Trade receivables 4,909 ( 8,481 ) Inventories 20,752 ( 18,077 ) Accounts payable 6,421 ( 4,609 ) Accrued liabilities ( 7,149 ) ( 8,600 ) Lease liabilities ( 1,127 ) ( 972 ) Income taxes 990 2,031 Other 3,430 2,425 Net cash provided by operating activities 92,630 18,803 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant, and equipment ( 16,922 ) ( 20,668 ) Acquisitions ( 3,355 ) — Other 335 296 Net cash used in investing activities ( 19,942 ) ( 20,372 ) CASH FLOWS FROM FINANCING ACTIVITIES: Cash dividends declared and paid ( 6,535 ) ( 5,900 ) New shares issued 1,147 1,004 Payroll taxes paid in exchange for shares withheld ( 2,140 ) ( 1,550 ) Shares repurchased ( 9,752 ) ( 6,557 ) Payments on revolving loan ( 52,000 ) ( 30,000 ) Proceeds from revolving loan borrowings — 45,000 Net cash (used in) provided by financing activities ( 69,280 ) 1,997 NET INCREASE IN CASH AND CASH EQUIVALENTS 3,408 428 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,566 3,496 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 10,974 $ 3,924 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for income taxes $ 16,025 $ 11,148 Cash paid for interest $ 2,002 $ 1,879 Noncash investing activities - capital expenditures in accounts payable $ 2,970 $ 2,535 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 2, 2023 , 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 October 1, 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. 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 2, 2023 , previously filed with the SEC. There has been no significant change in our accounting policies since the end of fiscal 2023. Note 2 — Acquisitions and Asset Sales Acquisition of EcoTech Enterprises, Inc.: On July 14, 2023, we acquired substantially all the assets of EcoTech Enterprises, Inc. ("EcoTech") for $ 3.4 million, under the terms of a purchase agreement with EcoTech and its shareholders. EcoTech was a water treatment chemical distribution company operating primarily in Arkansas. The $ 3.4 million purchase price was allocated primarily to customer lists, to be amortized over 10 years, property, plant and equipment, and net working capital. The results of operations since the acquisition date and the assets are included in our Water Treatment segment. Costs associated with this transaction were not material and were expensed as incurred. 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. 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 six months ended October 1, 2023 and October 2, 2022: Three months ended October 1, 2023 (In thousands) Industrial Water Treatment Health and Nutrition Total Manufactured, blended or repackaged products (1) $ 83,890 $ 90,964 $ 10,858 $ 185,712 Distributed specialty products (2) — — 26,113 26,113 Bulk products (3) 13,149 8,560 — 21,709 Other 1,496 1,401 95 2,992 Total external customer sales $ 98,535 $ 100,925 $ 37,066 $ 236,526 Three months ended October 2, 2022 (In thousands) Industrial Water Treatment Health and Nutrition Total Manufactured, blended or repackaged products (1) $ 93,548 $ 77,172 $ 11,736 $ 182,456 Distributed specialty products (2) — — 28,677 28,677 Bulk products (3) 18,132 7,720 — 25,852 Other 2,259 1,596 352 4,207 Total external customer sales $ 113,939 $ 86,488 $ 40,765 $ 241,192 Six months ended October 1, 2023 (In thousands) Industrial Water Treatment Health and Nutrition Total Manufactured, blended or repackaged products (1) $ 186,565 $ 175,749 $ 21,099 $ 383,413 Distributed specialty products (2) — — 52,267 52,267 Bulk products (3) 28,359 16,081 — 44,440 Other 4,484 2,746 296 7,526 Total external customer sales $ 219,408 $ 194,576 $ 73,662 $ 487,646 Six months ended October 2, 2022 (In thousands) Industrial Water Treatment Health and Nutrition Total Manufactured, blended or repackaged products (1) $ 195,160 $ 147,529 $ 23,697 $ 366,386 Distributed specialty products (2) — — 59,766 59,766 Bulk products (3) 38,587 14,510 — 53,097 Other 4,902 2,939 645 8,486 Total external customer sales $ 238,649 $ 164,978 $ 84,108 $ 487,735 (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 Six Months Ended October 01, 2023 October 02, 2022 October 01, 2023 October 02, 2022 Weighted-average common shares outstanding—basic 20,903,690 20,814,686 20,905,707 20,861,754 Dilutive impact of performance units and restricted stock 122,738 142,211 128,446 142,700 Weighted-average common shares outstanding—diluted 21,026,428 20,956,897 21,034,153 21,004,454 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 October 1, 2023 and April 2, 2023. 0 (In thousands) October 1, 2023 April 2, 2023 Assets Deferred compensation plan assets Level 1 $ 9,058 $ 7,659 Interest rate swap Level 2 $ 5,473 $ 4,028 Note 6 – Inventories Inventories at October 1, 2023 and April 2, 2023 consisted of the following: October 1, 2023 April 2, 2023 (In thousands) Inventory (FIFO basis) $ 104,878 $ 128,589 LIFO reserve ( 36,378 ) ( 39,812 ) Net inventory $ 68,500 $ 88,777 The first in, first out (“FIFO”) value of inventories accounted for under the last in, first out (“LIFO”) method was $ 83.9 million at October 1, 2023 and $ 101.4 million at April 2, 2023. The remainder of the inventory was valued and accounted for under the FIFO method. 8 Note 7 – Goodwill and Intangible Assets The carrying amount of goodwill was $ 77.4 million as of October 1, 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 October 1, 2023 and April 2, 2023 is as follows: October 1, 2023 April 2, 2023 (In thousands) Gross Amount Accumulated Amortization Net Gross Amount Accumulated Amortization Net Finite-life intangible assets Customer relationships $ 110,894 $ ( 41,561 ) $ 69,333 $ 109,107 $ ( 38,377 ) $ 70,730 Trademarks and trade names $ 6,370 $ ( 5,467 ) $ 903 $ 6,370 $ ( 5,267 ) $ 1,103 Other finite-life intangible assets 3,941 ( 3,913 ) 28 3,904 ( 3,904 ) — Total finite-life intangible assets 121,205 ( 50,941 ) 70,264 119,381 ( 47,548 ) 71,833 Indefinite-life intangible assets 1,227 — 1,227 1,227 — 1,227 Total intangible assets $ 122,432 $ ( 50,941 ) $ 71,491 $ 120,608 $ ( 47,548 ) $ 73,060 Note 8 – Debt Debt at October 1, 2023 and April 2, 2023 consisted of the following: October 1, 2023 April 2, 2023 (In thousands) Senior secured revolving loan $ 60,000 $ 112,000 Less: unamortized debt issuance costs ( 312 ) ( 356 ) Total debt, net of debt issuance costs 59,688 111,644 Less: current portion of long-term debt ( 9,913 ) ( 9,913 ) Total long-term debt $ 49,775 $ 101,731 We were in compliance with all covenants of our credit agreement as of October 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 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 27 % for the six months ended October 1, 2023, compared to 26 % for the six months ended October 2, 2022. The effective tax rate is impacted by projected levels of annual taxable income, permanent items, and state taxes. 9 Note 10 – 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 2024 and fiscal 2023. 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 70,859 shares in the aggregate for fiscal 2024. 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 October 1, 2023: Shares Weighted- Average Grant Date Fair Value Unvested at beginning of period 189,258 $ 34.64 Granted 61,819 43.06 Vested ( 105,600 ) 31.74 Unvested at end of period 145,477 $ 40.33 We recorded compensation expense related to performance share units and restricted stock of $ 1.0 million and $ 1.6 million for the three and six months ended October 1, 2023, respectively. We recorded compensation expense related to performance share units and restricted stock of $ 0.8 million and $ 1.2 million for the three and six months ended October 2, 2022, 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 directors, other than the Chief Executive Officer, 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 October 1, 2023, there were 10,647 shares of restricted stock with an average grant date fair value of $ 46.00 outstanding under this program. Compensation expense for both the three months ended October 1, 2023 and October 2, 2022 related to restricted stock awards to the Board was $ 0.1 million. Compensation expense for both the six months ended October 1, 2023 and October 2, 2022 related to restricted stock awards to the Board was $ 0.2 million. Note 11 – Share Repurchase Program 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 and six months ended October 1, 2023, we repurchased 167,796 shares at an aggregate purchase price of $ 9.8 million. During the three months ended October 2, 2022, no shares were repurchased, and during the six months ended October 2, 2022, we repurchased 181,657 shares at an aggregate purchase price of $ 6.6 million. As of October 1, 2023, 961,552 shares remained available to be repurchased under the share repurchase program. 10 Note 12 – 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 2, 2023 . 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 October 1, 2023: Sales $ 98,535 $ 100,925 $ 37,066 $ 236,526 Gross profit 17,844 29,308 6,734 53,886 Selling, general, and administrative expenses 6,806 10,145 3,944 20,895 Operating income 11,038 19,163 2,790 32,991 Three months ended October 2, 2022: Sales $ 113,939 $ 86,488 $ 40,765 $ 241,192 Gross profit 17,713 20,504 8,157 46,374 Selling, general, and administrative expenses 6,891 9,082 3,865 19,838 Operating income 10,822 11,422 4,292 26,536 Six months ended October 1, 2023: Sales $ 219,408 $ 194,576 $ 73,662 $ 487,646 Gross profit 37,150 55,716 13,011 105,877 Selling, general and administrative expenses 13,381 19,271 7,747 40,399 Operating income 23,769 36,445 5,264 65,478 Six months ended October 2, 2022: Sales $ 238,649 $ 164,978 $ 84,108 $ 487,735 Gross profit 37,722 39,457 15,944 93,123 Selling, general and administrative expenses 13,276 17,783 7,664 38,723 Operating income 24,446 21,674 8,280 54,400 No significant changes to identifiable assets by segment occurred during the six months ended October 1, 2023. Note 13 – Subsequent Events In October 2023, we acquired substantially all the assets of Water Solutions Unlimited, Inc. ("Water Solutions") for $ 60 million and up to an additional $ 15 million to be paid after three years based on achieving certain targets, under the terms of an asset purchase agreement with Water Solutions and its shareholders. Water Solutions is a manufacturer and distributor of water treatment chemicals serving customers primarily throughout Indiana, Illinois and Michigan. 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. In October 2023, we acquired substantially all the assets of Miami Products & Chemical Company ("Miami Products") for $ 15.5 million, under the terms of an asset purchase agreement with Miami Products and its shareholders. Miami Products is a bleach manufacturer and distributor serving customers primarily throughout Ohio and the surrounding region. 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. 11