What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-05-14 compared with 2024-05-15 · 66 added, 69 removed, 141 unchanged (49% of the section changed)

4 unchanged sentences

You are encouraged to reference Part II, Item 7, within that report, for a discussion of our financial condition and results of operations for fiscal 2024 compared to fiscal 2023.

We derive substantially all of our revenues from the sale of specialty chemicals and ingredients that we formulate, distribute, blend and manufacture for our Industrial, Water Treatment and Health and Nutrition customers.

We derive substantially all of our revenues from the sale of specialty chemicals and ingredients that we formulate, manufacture, blend and distribute, for our Water Treatment, Industrial, and Health and Nutrition customers.

Financial Overview

Highlights of fiscal 2025 include:

• Sales of $919.2 million, a 2% decrease from fiscal 2023;

• Sales of $974.4 million, an increase of $55.2 million, or 6% from fiscal 2024;

• Gross profit of $225.5 million, an increase of $31.9 million, or 16% from fiscal 2024;

• Diluted earnings per share (EPS) of $4.03, an increase of $0.44, or 12%, from fiscal 2024.

We focus on total profitability dollars when evaluating our financial results as opposed to profitability as a percentage of sales, as sales dollars tend to fluctuate as raw material prices rise and fall, particularly in our Industrial and Water Treatment segments.

The costs for certain of our raw materials can rise or fall rapidly, causing fluctuations in gross profit as a percentage of sales.

We use the last in, first out (“LIFO”) method of valuing the majority of our inventory in our Industrial and Water Treatment segments, which causes the most recent product costs to be recognized in our income statement.

We use the last in, first out (“LIFO”) method of valuing the majority of our inventory in our Water Treatment and Industrial segments, which causes the most recent product costs to be recognized in our income statement.

The LIFO inventory valuation method and the resulting cost of sales are consistent with our business practices of pricing to current chemical raw material prices.

Inventories in our Health and Nutrition segment are valued using the first-in, first-out (“FIFO”) method.

We disclose the sales of our bulk commodity products as a percentage of total sales dollars for our Industrial and Water Treatment segments.

We disclose the sales of our bulk commodity products as a percentage of total sales dollars for our Water Treatment and Industrial segments.

Our definition of bulk commodity products includes products that we do not modify in any way, but receive, store, and ship from our facilities, or direct ship to our customers in large quantities.

3 unchanged sentences

Factors Affecting Comparability of Results

Business Acquisitions and Asset Sales

On March 8, 2024, we acquired substantially all the assets of Industrial Research Corporation ("Industrial Research") under the terms of a purchase agreement with Industrial Research and its shareholders.

Industrial Research was a distributor of water treatment chemicals and equipment for its customers in central to northern Louisiana, eastern Texas and southern Arkansas.

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

On October 31, 2023, we acquired substantially all the assets of The Miami Products & Chemical Company ("Miami Products") under the terms of a purchase agreement with Miami Products and its shareholders.

Miami Products was a bleach manufacturer and distributor serving customers primarily throughout Ohio and the surrounding region.

Business Acquisitions

On January 31, 2025, we acquired substantially all the assets of Amerochem Corporation ("Amerochem") under the terms of a purchase agreement with Amerochem and its shareholders.

Amerochem distributed water treatment chemicals and equipment to its customers primarily throughout North Carolina.

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

On October 27, 2023, we acquired substantially all the assets of Water Solutions Unlimited, Inc.

("Water Solutions") under the terms of a purchase agreement with Water Solutions and its shareholders.

Water Solutions was a manufacturer and distributor of water treatment chemicals serving customers primarily throughout Indiana, Illinois and Michigan.

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

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

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

The results of operations since the

acquisition date and the assets are included in our Water Treatment segment.

On June 28, 2024, we acquired substantially all the assets of Wofford Water Service, Inc.

("Wofford") under the terms of a purchase agreement with Wofford and its shareholders.

Wofford distributed water treatment chemicals and equipment to customers mainly in Mississippi.

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

On July 14, 2023, we acquired substantially all the assets of EcoTech Enterprises, Inc.

("EcoTech") under the terms of a purchase agreement with EcoTech and its shareholders.

EcoTech was a water treatment chemical distribution company operating primarily in Arkansas.

On June 3, 2024, we acquired substantially all the assets of Intercoastal Trading, Inc.

and certain related entities ("Intercoastal") under the terms of a purchase agreement with Intercoastal and its shareholders.

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

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

The aggregate annual revenue of these four businesses acquired in fiscal 2025 totaled approximately $67 million, as determined using the applicable twelve-month period preceding each respective acquisition date.

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 deemed core to our Industrial segment operations.

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 as a reduction to selling, general and administrative expenses.

Recent Developments

After the end of the fiscal year, on April 25, 2025, we acquired substantially all of the assets of Surplus Management, Inc.

dba WaterSurplus ("WaterSurplus") for approximately $150 million, and may be obligated to pay up to an additional $53.7 million based on achieving certain earnings targets five years after the closing of the acquisition.

WaterSurplus delivers sustainable water treatment solutions throughout the United States focused on membrane separation systems, engineering and design services, media filtration systems, new equipment and rental unit manufacturing and sales, along with rapid-response PFAS removal solutions for “forever chemicals”.

WaterSurplus serves municipal water customers as well as customers in the food and beverage industry, offering patented products within its filtration business that reduce the frequency of membrane cleaning resulting in lower energy costs, downtime, and lower overall operational costs.

Results of Operations

12 unchanged sentences

Fiscal 2025 Compared to Fiscal 2024

Sales were $919.2 million for fiscal 2024, a decrease of $15.9 million, or 2%, from sales of $935.1 million for fiscal 2023.

Increased sales in our Water Treatment segment were more than offset by decreased sales in our Industrial and Health & Nutrition segments.

Industrial Segment.

Industrial segment sales decreased $61.3 million, or 13%, to $409.5 million for fiscal 2024, as compared to $470.8 million for fiscal 2023.

Sales of bulk commodity products in the Industrial segment were approximately 14% of sales dollars in fiscal 2024 and 16% of sales dollars in fiscal 2023.

The sale of our consumer bleach packaging business at the end of fiscal 2023 resulted in $14.5 million lower sales in the current year.

In addition, sales declined due to overall lower volumes.

Sales were $974.4 million for fiscal 2025, an increase of $55.2 million, or 6%, from sales of $919.2 million for fiscal 2024.

The year-over-year increase was driven by sales growth in our Water Treatment segment, while sales in our Industrial and Health and Nutrition segments declined year over year.

Water Treatment Segment.

1 unchanged sentence

Sales of bulk commodity products in the Water Treatment segment were approximately 9% of sales dollars in both fiscal 2025 and fiscal 2024.

In addition to $23.9 million in sales from acquired businesses, sales increased as a result of increased selling prices on many of our products as well as increased sales volumes of certain of our products.

Sales increased as a result of $72 million of added sales from acquired businesses as well as increased sales volumes of 5% in our legacy business.

Industrial Segment.

Industrial segment sales decreased $27.0 million, or 7%, to $382.5 million for fiscal 2025, as compared to $409.5 million for fiscal 2024.

Sales of bulk commodity products in the Industrial segment were approximately 15% of sales dollars in fiscal 2025 and 14% of sales dollars in fiscal 2024.

Although total sales volume was up slightly year over year, sales declined due to lower selling prices on certain products and product mix changes.

Health and Nutrition Segment.

Health and Nutrition segment sales decreased $0.9 million, or 1%, to $145.5 million for fiscal 2025, as compared to $146.4 million for fiscal 2024.

Sales decreased primarily due to decreased sales of our manufactured products, which we believe was driven by customers destocking inventory in the first half of the current fiscal year.

An increase in sales of our distributed products was largely offset by decreased sales of our manufactured products.

The overall decrease in sales of our manufactured products was driven by decreased sales of a lower-margin product.

Gross profit increased $31.9 million, or 16%, to $225.5 million, or 23% of sales, for fiscal 2025, from $193.6 million, or 21% of sales, for fiscal 2024.

During fiscal 2024, the LIFO reserve decreased, and gross profits increased, by $15.4 million, primarily due to decreased raw material costs.

In fiscal 2023, the LIFO reserve increased, and gross profits decreased, by $18.5 million, primarily due to rising raw material costs.

Included as a reduction to gross profit in the current year was a $7.7 million charge to operating expense for an environmental liability related to perchlorinated biphenyls (PCBs) discovered in the soil at our Rosemount, MN facility.

Industrial Segment.

Gross profit for the Industrial segment decreased $0.6 million, or 1%, to $67.5 million, or 16% of sales, for fiscal 2024, from $68.1 million, or 14% of sales, for fiscal 2023.

During fiscal 2024, the LIFO reserve decreased, and gross profits increased, by $12.1 million, primarily due to decreased raw material costs.

In fiscal 2023, the LIFO reserve increased, and gross profits decreased, by $12.3 million, primarily due to rising raw material costs.

Offsetting the impact of the favorable year-over-year LIFO change, gross profit decreased as a result of the $7.7 million charge to operating expense for an environmental liability related to PCBs discovered in the soil at our Rosemount, MN facility as well as lower sales.

During fiscal 2025, the LIFO reserve decreased, and gross profits increased, by $1.6 million, primarily due to lower prices year-over-year on certain products.

In fiscal 2024, the LIFO reserve decreased, and gross profits increased, by $15.4 million.

Included as a reduction to gross profit in the prior year was a $7.7 million charge to operating expense for an environmental liability related to perchlorinated biphenyls (PCBs) discovered in the soil at our Rosemount, MN, facility.

Water Treatment Segment.

Gross profit for the Water Treatment segment increased $23.1 million, or 23%, to $121.6 million, or 27% of sales, for fiscal 2025, from $98.5 million, or 27% of sales, for fiscal 2024.

During fiscal 2024, the LIFO reserve decreased, and gross profits increased, by $3.3 million, primarily due to decreased raw material costs.

During fiscal 2023, the LIFO reserve increased, and gross profit decreased, by $6.2 million, primarily due to rising raw material costs.

Gross profit increased as a result of improved per-unit margins on many of our products as well as increased sales, including the added sales from acquired businesses.

During fiscal 2025, the LIFO reserve decreased, and gross profits increased, by $0.5 million.

During fiscal 2024, the LIFO reserve decreased, and gross profit increased, by $3.3 million.

Gross profit increased as a result of the increased sales.

Industrial Segment.

Gross profit for the Industrial segment increased $5.1 million, or 8%, to $72.6 million, or 19% of sales, for fiscal 2025, from $67.5 million, or 16% of sales, for fiscal 2024.

During fiscal 2025, the LIFO reserve decreased, and gross profits increased, by $1.1 million.

In fiscal 2024, the LIFO reserve decreased, and gross profits increased, by $12.1 million.

Included as a reduction to gross profit in the prior year was a $7.7 million charge to operating expense for an environmental liability related to PCBs discovered in the soil at our Rosemount, MN, facility.

Gross profit increased as a result of the environmental charge in the prior year not repeating in the current year, partially offset by the negative year-over-year impact of the change in the LIFO reserve, as well as improved margins on certain products.

Health and Nutrition Segment.

Gross profit for our Health and Nutrition segment decreased $2.2 million, or 7%, to $27.6 million, or 19% of sales, for fiscal 2024, from $29.8 million, or 19% of sales, for fiscal 2023.

Gross profit decreased due to lower sales.

Gross profit for our Health and Nutrition segment increased $3.7 million, or 13%, to $31.3 million, or 22% of sales, for fiscal 2025, from $27.6 million, or 19% of sales, for fiscal 2024.

Gross profit increased as a result of a favorable product mix shift.

Selling, General and Administrative Expenses

SG&A expenses increased $16.8 million, or 19% to $106.4 million, or 11% of sales, for fiscal 2025, from $89.6 million, or 10% of sales, for fiscal 2024.

Included in SG&A expenses for the prior year was a gain of approximately $3.0 million related to the sale of certain assets related to our consumer bleach packaging business.

In addition, a year-over-year increase in compensation expense of $1.4 million related to our non-qualified deferred compensation plan reduced SG&A expenses, with the offset in Other Expense.

Additionally, expenses increased due to the added costs from the acquired businesses in our Water Treatment segment of $5.8 million, including $1.8 million of amortization of intangibles, as well as increased variable expenses, most notably variable pay.

Expenses increased largely due to $10.4 million in added costs from the acquired business in our Water Treatment segment, including amortization of intangibles of $4.2 million, as well as increased variable costs.

Operating Income

1 unchanged sentence

Interest Expense, Net

Interest expense was $4.3 million for fiscal 2024, a decrease of $0.9 million from interest expense of $5.2 million for fiscal 2023.

Interest expense decreased due to lower outstanding borrowings in the current year as compared to the prior year, offset slightly by higher borrowing rates.

Interest expense was $5.4 million for fiscal 2025, an increase of $1.2 million from interest expense of $4.3 million for fiscal 2024.

Interest expense increased due to higher outstanding borrowings in the current year, primarily to fund current year acquisitions.

Income Tax Provision

Our effective tax rate was approximately 26% for fiscal 2024 and 27% for fiscal 2023.

The current year decrease in the effective tax rate was primarily driven by favorable tax provision adjustments recorded.

Our effective tax rate was approximately 26% for both fiscal 2025 and fiscal 2024.

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

22 unchanged sentences

Cash provided by operating activities in fiscal 2025 was $111.1 million compared to $159.5 million in fiscal 2024.

Our net cash provided by operating activities increased $82.1 million compared to fiscal 2023.

In fiscal 2024, our operating cash flow was improved by $47 million in the aggregate due primarily to favorable year-over-year changes in trade receivables and inventory.

In the prior fiscal year, we expended a net of $13 million in the aggregate for working capital primarily as a result of lower year-over-year payables.

This, combined with improved net income, resulted in the year-over-year increase in net cash provided by operating activities.

The decrease in cash provided by operating activities in fiscal 2025 as compared to fiscal 2024 was primarily driven by increases in customer receivables as a result of higher sales, as well as higher inventory levels, partially offset by an increase in net income.

Due to the nature of our operations, which includes purchases of large quantities of bulk chemicals, the timing of purchases can result in significant changes in working capital and the resulting operating cash flow.

Historically, our cash requirements for working capital increase during the period from March through November as caustic soda inventory levels increase as most of our barges are received during this period.

Historically, our cash requirements for working capital increase during the period from March through November as inventory levels increase as most of our barges are received during this period.

Cash used in investing activities was $128.0 million in fiscal 2025 compared to $122.5 million in fiscal 2024.

Capital expenditures for property, plant and equipment were $41.1 million in fiscal 2025 and $40.2 million in fiscal 2024.

The current year decrease in capital expenditures was primarily driven by decreased expenditures for facility improvements and expansions.

Cash used in investing activities included Water Treatment group acquisition spending of $83.5 in fiscal 2024 compared to no acquisition spending for acquisitions in fiscal 2023.

Cash used in investing activities also included proceeds from asset disposals of $1.1 million in fiscal 2024 compared to $7.1 million in fiscal 2023.

The proceeds received in fiscal 2023 related primarily to our sale of certain assets related to our consumer bleach packaging business.

Cash used in investing activities included Water Treatment group acquisition spending of $87.4 million in fiscal 2025 compared to $83.5 million of acquisition spending in fiscal 2024.

Cash used in financing activities was $14.8 million in fiscal 2025 compared to $37.4 million in fiscal 2024.

Cash used in financing activities included net debt repayments of $13.0 million in fiscal 2024 and $14.0 million in fiscal 2023.

Cash used in financing activities included net debt borrowings of $50.0 million in fiscal 2025 and net debt repayments of $13.0 million in fiscal 2024.

We paid out cash dividends of $14.6 million in fiscal 2025 and $13.2 million in fiscal 2024.

In fiscal 2025, we used $20.7 million to repurchase shares under our board-authorized share repurchase program, and in fiscal 2024, we used $11.3 million to repurchase shares under the program.

Our cash balance was $7.2 million at March 31, 2024, a decrease of $0.4 million as compared with April 2, 2023.

Our cash balance was $5.1 million at March 30, 2025, a decrease of $2.1 million as compared with March 31, 2024.

Cash flows generated by operations during fiscal 2025 were offset by the cash expended for acquisitions, capital expenditures, repayments of debt, dividend payments and share repurchases in fiscal 2025.

We are party to a Credit Agreement with U.S.

Bank as Sole Lead Arranger and Sole Book Runner, and other lenders from time to time party thereto, whereby U.S.

Bank is also serving as Administrative Agent.

The Credit Agreement provides us with a Revolving Loan Facility totaling $250.0 million.

We are party to the Credit Agreement with U.S.

Bank and the lenders which provides us with the Revolving Loan Facility totaling $400.0 million.

The Revolving Loan Facility includes a $10 million letter of credit subfacility and $25 million swingline subfacility.

1 unchanged sentence

The Revolving Loan Facility is secured by substantially all of our personal property assets and those of our subsidiaries.

At March 30, 2025, we had $149 million outstanding under the Revolving Loan Facility.

Borrowings under the Revolving Loan Facility bear interest at a rate per annum equal to one of the following, plus, in both cases, an applicable margin based upon our leverage ratio:

(a) Term SOFR, which includes a credit spread adjustment of 0.10%, for an interest period of one, three or six months as selected by us, reset at the end of the selected interest period, or (b) a base rate determined by reference to the highest of (1) U.

(a) Term SOFR for an interest period of one, three or six months as selected by us, reset at the end of the selected interest period, or (b) a base rate determined by reference to the highest of (1) U.

Bank’s prime rate, (2) the Federal Funds Effective Rate plus 0.5%, or (3) one-month Term SOFR for U.S.

7 unchanged sentences

As of March 30, 2025, the unamortized balance of these costs was $0.2 million, and is reflected as a reduction of debt on our balance sheet.

The Credit Agreement requires us to maintain (a) a minimum fixed charge coverage ratio of 1.15 to 1.00 and (b) a maximum total cash flow leverage ratio of 3.0 to 1.0.

The Credit Agreement requires us to maintain (a) a minimum fixed charge coverage ratio of 1.15 to 1.00 and (b) a maximum total cash flow leverage ratio of 3.5 to 1.0, subject to an election by us to increase the maximum total cash flow leverage ratio to 4.0 to 1.0 after certain Permitted Acquisitions subject to limitations set forth in the Credit Agreement.

The Credit Agreement also contains other customary affirmative and negative covenants, including covenants that restrict our ability to incur additional indebtedness, dispose of significant assets, make certain investments, including any acquisitions other than permitted acquisitions, make certain payments, enter into sale and leaseback transactions, grant liens on our assets or enter into rate management transactions, subject to certain limitations.

9 unchanged sentences

We believe we could borrow additional funds under our current or new credit facilities or sell equity for strategic reasons or to further strengthen our financial position.

We believe that our existing cash and cash equivalents, together with cash generated from operations and available borrowings under our existing Credit Agreement, will be sufficient to meet our working capital expenditure requirements for at least the next 12 months.

Material Cash Requirements

8 unchanged sentences

Pension withdrawal liability (4) $ 467 $ 467 $ 467 $ 467 $ 467 $ 1,636 $ 3,971

Earnout liability (5) $ — $ 12,604 $ — $ — $ — $ — $ 12,604

(1) Represents balance outstanding as of March 30, 2025, and assumes such amount remains outstanding until its maturity date, as periodic payments are not required under the terms of our Credit Agreement.

However, it is our intention to pay down our debt with available excess cash flow.

See Note 8 of our consolidated Financial Statements for further information.

See Note 8 to our consolidated Financial Statements for further information.

(2) Represents interest payments and commitment fees payable on outstanding balances under our revolver, net of the expected receivable from our interest rate swap agreement, and assumes interest rates remain unchanged from the rate as of March 30, 2025.

2 unchanged sentences

Payments on this obligation will continue through 2034.

(5) Represents the fair value of the earnout liability recorded in conjunction with the Water Solutions acquisition is based upon achieving certain targets payable 3 years after acquisition.

In addition to the above contractual obligations, in the ordinary course of business we have routine cash requirements related to capital expenditures for new trucks, facility improvements and expansions, safety equipment and other additions of property, plant and equipment.

Our capital expenditures in fiscal 2025 were $41.1 million and in fiscal 2024 were $40.2 million.

We anticipate total capital expenditures to be in the range of $40 to $45 million for fiscal 2025.

We anticipate total capital expenditures to be approximately $60 million for fiscal 2026.

Critical Accounting Estimates

17 unchanged sentences

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-K

Item 7. Management’s Discussion and Analysis