What changed in this filing

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Item 1. Financial Statements

2025-01-29 compared with 2024-10-30 · 78 added, 68 removed, 413 unchanged (26% of the section changed)

3 unchanged sentences

(In thousands, except share data)

September 29,

2024 March 31,

26 unchanged sentences

Total current liabilities 84,254 103,307

LONG-TERM LIABILITIES:

Long-term debt, less current portion 103,884 88,818

5 unchanged sentences

Other long-term liabilities 461 1,310

Total long-term liabilities 166,005 148,601

Total liabilities 250,259 251,908

3 unchanged sentences

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

20,766,764 and 20,790,261 shares issued and outstanding as of September 29, 2024 and March 31, 2024, respectively

20,766,764 and 20,790,261 shares issued and outstanding as of December 29, 2024 and March 31, 2024, respectively

Additional paid-in capital 32,783 38,154

7 unchanged sentences

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

Three Months Ended Six Months Ended

September 29,

2024 October 1,

2023 September 29,

2024 October 1,

Three Months Ended Nine Months Ended

2024 December 31,

2023 December 29,

2024 December 31,

Sales $ 226,205 $ 208,496 $ 729,113 $ 696,142

4 unchanged sentences

Interest expense, net ( 1,216 ) ( 1,168 ) ( 3,906 ) ( 3,033 )

Other income (expense) 673 ( 289 ) 832 48

Other income 436 853 1,268 901

Income before income taxes 20,283 18,159 91,961 81,820

10 unchanged sentences

(In thousands)

Three Months Ended Six Months Ended

September 29,

2024 October 1,

2023 September 29,

2024 October 1,

Three Months Ended Nine Months Ended

2024 December 31,

2023 December 29,

2024 December 31,

Net income $ 15,021 $ 14,885 $ 68,018 $ 61,531

Other comprehensive income, net of tax:

Unrealized (loss) gain on interest rate swap ( 1,330 ) 306 ( 1,436 ) 1,055

Unrealized gain (loss) on interest rate swap 629 ( 1,299 ) ( 807 ) ( 244 )

Total comprehensive income $ 15,650 $ 13,586 $ 67,211 $ 61,287

26 unchanged sentences

BALANCE — September 29, 2024 20,766,764 $ 208 $ 31,060 $ 410,425 $ 1,679 $ 443,372

Cash dividends declared and paid ($ 0.18 per share)

— — — ( 3,764 ) — ( 3,764 )

Share-based compensation expense — — 1,723 — — 1,723

Other comprehensive loss, net of tax — — — — 629 629

Net income — — — 15,021 — 15,021

BALANCE — December 29, 2024 20,766,764 $ 208 $ 32,783 $ 421,682 $ 2,308 $ 456,981

Common Stock Additional

21 unchanged sentences

BALANCE — October 1, 2023 20,787,626 $ 208 $ 35,918 $ 342,535 $ 3,995 $ 382,656

Cash dividends declared and paid ($ 0.16 per share)

— — — ( 3,351 ) — ( 3,351 )

Share-based compensation expense — — 1,287 — — 1,287

ESPP shares issued 26,731 — 1,096 — — 1,096

Shares repurchased ( 24,065 ) — ( 1,520 ) — — ( 1,520 )

Other comprehensive income, net of tax — — — — ( 1,299 ) ( 1,299 )

Net income — — — 14,885 $ — 14,885

BALANCE — December 31, 2023 20,790,292 $ 208 $ 36,781 $ 354,069 $ 2,696 $ 393,754

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Six Months Ended

September 29,

2024 October 1,

Nine Months Ended

2024 December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

29 unchanged sentences

Net cash used in financing activities ( 6,278 ) ( 13,055 )

NET INCREASE IN CASH AND CASH EQUIVALENTS 373 3,408

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,152 ( 1,825 )

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,153 7,566

14 unchanged sentences

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

The results of operations for the six months ended September 29, 2024 are not necessarily indicative of the results that may be expected for the full year.

The results of operations for the nine months ended December 29, 2024 are not necessarily indicative of the results that may be expected for the full year.

References to fiscal 2024 refer to the fiscal year ended March 31, 2024 and references to fiscal 2025 refer to the fiscal year ending March 30, 2025.

21 unchanged sentences

Note 2 — Acquisitions

Acquisition of Waterguard, Inc.:

On October 30, 2024, we acquired substantially all the assets of Waterguard, Inc.

("Water Guard") for $ 18.0 million under the terms of a purchase agreement with Water Guard and its shareholders.

Water Guard distributes water treatment chemicals and equipment to its customers primarily throughout North Carolina.

Of the $ 18.0 million purchase price, $ 9.3 million was allocated to customer relationships, to be amortized over 15 years, $ 5.1 million was allocated to goodwill, $ 1.2 million was allocated to property, plant and equipment, and the remaining amount was allocated to net working capital.

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.

The purchase price allocation is not yet complete due to the timing of the acquisition.

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.

Acquisition of Wofford Water Service, Inc.:

11 unchanged sentences

Intercoastal distributes water treatment chemicals and equipment to its customers in Maryland, Delaware and Virginia.

Of the $ 22.0 million purchase price, $ 10.7 million was allocated to customer relationships, to be amortized over 15 years, $ 0.3 million to trade names, to be amortized over two years, $ 0.1 million to non-compete agreements, to be amortized over one year, $ 7.1 million to goodwill, and the remaining amount to net working capital and property, plant and equipment.

Of the $ 22.0 million purchase price, $ 10.7 million was allocated to customer relationships, to be amortized over 15 years, $ 0.3 million to trade names, to be amortized over two years, $ 0.1 million to non-compete agreements, to be amortized over one year, $ 7.2 million to goodwill, $2.4 million was allocated to property, plant and equipment, and the remaining amount to net working capital.

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.

The purchase price allocation is not yet complete due to the timing of the acquisition.

The results of operations since the acquisition date and the assets are included in our Water Treatment segment.

25 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 six months ended September 29, 2024 and October 1, 2023:

Three months ended September 29, 2024

The following tables disaggregate external customer net sales by major revenue stream for the three and nine months ended December 29, 2024 and December 31, 2023:

Three months ended December 29, 2024

(In thousands) Water

9 unchanged sentences

Total external customer sales $ 99,752 $ 91,997 $ 34,456 $ 226,205

Three months ended October 1, 2023

Three months ended December 31, 2023

(In thousands) Water

9 unchanged sentences

Total external customer sales $ 82,019 $ 92,990 $ 33,487 $ 208,496

Six months ended September 29, 2024

Nine months ended December 29, 2024

(In thousands) Water

9 unchanged sentences

Total external customer sales $ 341,456 $ 285,135 $ 102,522 $ 729,113

Six months ended October 1, 2023

Nine months ended December 31, 2023

(In thousands) Water

17 unchanged sentences

Basic and diluted EPS were calculated using the following:

Three Months Ended Six Months Ended

September 29, 2024 October 01, 2023 September 29, 2024 October 01, 2023

Three Months Ended Nine Months Ended

December 29, 2024 December 31, 2023 December 29, 2024 December 31, 2023

Weighted-average common shares outstanding—basic 20,766,764 20,781,632 20,780,213 20,864,349

18 unchanged sentences

The earnout liability recorded in conjunction with the Water Solutions acquisition is based upon achieving certain targets.

earnout is based on a target of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in year three

of the acquisition.

The earnout liability was valued based upon a risk-neutral pricing analysis within a Monte Carlo simulation

framework, which is a Level 3 input.

The earnout is based on a target of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in year three of the acquisition.

The earnout liability was valued based upon a risk-neutral pricing analysis within a Monte Carlo simulation framework, which is a Level 3 input.

The earnout liability is adjusted to fair value at each reporting date until settled.

Changes in fair value are included in selling, general and administrative expenses in our Consolidated Statements of Income.

The following tables summarize the balances of assets and liabilities measured at fair value on a recurring basis as of September 29, 2024 and March 31, 2024.

(In thousands) September 29, 2024 March 31, 2024

The following tables summarize the balances of assets and liabilities measured at fair value on a recurring basis as of December 29, 2024 and March 31, 2024.

(In thousands) December 29, 2024 March 31, 2024

Deferred compensation plan assets Level 1 $ 12,528 $ 10,042

4 unchanged sentences

Earnout liability at March 31, 2024

Addition for acquisition $ —

Fair value adjustments $ 1,027

Earnout liability at September 29, 2024

Earnout liability at December 29, 2024

Note 6 – Inventories

Inventories at September 29, 2024 and March 31, 2024 consisted of the following:

September 29,

Inventories at December 29, 2024 and March 31, 2024 consisted of the following:

2024 March 31,

3 unchanged sentences

Net inventory $ 81,634 $ 74,600

The first in, first out (“FIFO”) value of inventories accounted for under the last in, first out (“LIFO”) method was $ 79.3 million at September 29, 2024 and $ 76.2 million at March 31, 2024.

The first in, first out (“FIFO”) value of inventories accounted for under the last in, first out (“LIFO”) method was $ 74.1 million at December 29, 2024 and $ 76.2 million at March 31, 2024.

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 $ 111.6 million as of September 29, 2024 and $ 103.4 million as of March 31, 2024, of which $ 60.1 million was related to our Water Treatment segment, $ 44.9 million was related to our Health and Nutrition segment, and $ 6.5 million was related to our Industrial segment.

The increase in goodwill during the six months ended September 29, 2024 represents goodwill recorded in connection with the acquisitions of the assets of Intercoastal and Wofford as discussed in Note 2.

The following is a summary of our identifiable intangible assets as of September 29, 2024 and March 31, 2024:

September 29, 2024 March 31, 2024

The carrying amount of goodwill was $ 116.7 million as of December 29, 2024 and $ 103.4 million as of March 31, 2024, of which $ 65.3 million was related to our Water Treatment segment, $ 44.9 million was related to our Health and Nutrition segment, and $ 6.5 million was related to our Industrial segment.

The increase in goodwill during the nine months ended December 29, 2024 represents goodwill recorded in connection with the acquisitions of the assets of Intercoastal, Wofford, and Waterguard as discussed in Note 2.

The following is a summary of our identifiable intangible assets as of December 29, 2024 and March 31, 2024:

December 29, 2024 March 31, 2024

(In thousands) Gross

11 unchanged sentences

Note 8 – Debt

Debt at September 29, 2024 and March 31, 2024 consisted of the following:

September 29,

Debt at December 29, 2024 and March 31, 2024 consisted of the following:

2024 March 31,

5 unchanged sentences

Total long-term debt $ 103,884 $ 88,818

We were in compliance with all covenants of our credit agreement as of September 29, 2024.

We were in compliance with all covenants of our credit agreement as of December 29, 2024.

Note 9 – Income Taxes

2 unchanged sentences

The tax years prior to our fiscal year ended March 28, 2021 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 the six months ended September 29, 2024, compared to 27 % for the six months ended October 1, 2023.

Our effective income tax rate was 26 % for the nine months ended December 29, 2024, compared to 25 % for the nine months ended December 31, 2023.

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

6 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 six months ended September 29, 2024:

The following table represents the restricted stock activity for the nine months ended December 29, 2024:

Shares Weighted-

5 unchanged sentences

Unvested at end of period 137,247 $ 61.49

We recorded compensation expense related to performance share units and restricted stock of $ 1.5 million and $ 2.6 million for the three and six months ended September 29, 2024, respectively.

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 $ 1.3 million and $ 3.9 million for the three and nine months ended December 29, 2024, respectively.

We recorded compensation expense related to performance share units and restricted stock of $ 1.0 million and $ 2.7 million for the three and nine months ended December 31, 2023, respectively.

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 September 29, 2024, there were 6,734 shares of restricted stock with an average grant date fair value of $ 103.90 outstanding under this program.

Compensation expense for the three and six months ended September 29, 2024 related to restricted stock awards to the Board was $ 0.2 million and $ 0.3 million, respectively.

Compensation expense for the three and six months ended October 1, 2023 related to restricted stock awards to the Board was $ 0.1 million and $ 0.2 million, respectively.

As of December 29, 2024, there were 6,734 shares of restricted stock with an average grant date fair value of $ 103.90 outstanding under this program.

Compensation expense for the three and nine months ended December 29, 2024 related to restricted stock awards to the Board was $ 0.2 million and $ 0.5 million, respectively.

Compensation expense for the three and nine months ended December 31, 2023 related to restricted stock awards to the Board was $ 0.1 million and $ 0.4 million, respectively.

Note 11 – Share Repurchase Program

2 unchanged sentences

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 29, 2024, no shares were repurchased, and during the six months ended September 29, 2024, we repurchased 105,541 shares at an aggregate purchase price of $ 9.1 million.

During the three and six months ended October 1, 2023, we repurchased 167,796 shares at an aggregate purchase price of $ 9.8 million.

As of September 29, 2024, 831,946 shares remained available to be repurchased under the share repurchase program.

During the three months ended December 29, 2024, no shares were repurchased, and during the nine months ended December 29, 2024, we repurchased 105,541 shares at an aggregate purchase price of $ 9.1 million.

During the three months ended December 31, 2023, we repurchased 24,065 shares at an aggregate purchase price of $ 1.5 million, and during the nine months ended December 31, 2023, we repurchased 191,861 shares at an aggregate purchase price of $ 11.3 million.

As of December 29, 2024, 831,946 shares remained available to be repurchased under the share repurchase program.

Note 12 – Commitments and Contingencies

6 unchanged sentences

While it is possible that additional expense related to the remediation will be incurred in future periods if currently unknown issues arise, we are unable to estimate the extent of any further financial impact.

No expenses were charged against this liability during the three and six months ended September 29, 2024.

No expenses were charged against this liability during the three and nine months ended December 29, 2024.

Note 13 – Segment Information

11 unchanged sentences

Treatment Industrial Health and Nutrition Total

Three months ended September 29, 2024:

Three months ended December 29, 2024:

Sales $ 99,752 $ 91,997 $ 34,456 $ 226,205

2 unchanged sentences

Operating income 9,973 8,122 2,968 21,063

Three months ended October 1, 2023:

Three months ended December 31, 2023:

Sales $ 82,019 $ 92,990 $ 33,487 $ 208,496

2 unchanged sentences

Operating income 7,771 9,203 1,500 18,474

Six months ended September 29, 2024:

Nine months ended December 29, 2024:

Sales $ 341,456 $ 285,135 $ 102,522 $ 729,113

2 unchanged sentences

Operating income 50,840 34,675 9,084 94,599

Six months ended October 1, 2023:

Nine months ended December 31, 2023:

Sales $ 276,595 $ 312,398 $ 107,149 $ 696,142

2 unchanged sentences

Operating income 44,216 32,972 6,764 83,952

No significant changes to identifiable assets by segment occurred during the six months ended September 29, 2024.

Note 14 – Subsequent Events

On October 30, 2024, we acquired substantially all the assets of Waterguard, Inc.

("Water Guard") for $ 18 million, under the terms of an asset purchase agreement with Water Guard and its shareholders.

Water Guard is a distributor of water treatment chemicals and equipment serving customers primarily throughout North Carolina.

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.

No significant changes to identifiable assets by segment occurred during the nine months ended December 29, 2024.

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