What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-07-30 compared with 2025-01-29 · 101 added, 140 removed, 71 unchanged (77% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of our financial condition and results of operations for the nine months ended December 29, 2024 as compared to the similar period ended December 31, 2023.

The following is a discussion and analysis of our financial condition and results of operations for the three months ended June 29, 2025 as compared to the similar period ended June 30, 2024.

This discussion should be read in conjunction with the condensed consolidated financial statements and notes to condensed consolidated financial statements included in this quarterly report on Form 10-Q and Item 8 of our Annual Report on Form 10-K for the fiscal year ended March 30, 2025 .

We derive substantially all of our revenues from the sale of chemicals and specialty ingredients to our customers in a wide variety of industries.

We derive substantially all of our revenues from the sale of water treatment solutions, specialty ingredients, and chemicals to our customers in a wide variety of industries.

We began our operations primarily as a distributor of bulk chemicals with a strong customer focus.

Over the years, we have maintained the strong customer focus and have expanded our business by increasing our sales of value-added chemicals and specialty ingredients, including manufacturing, blending, and repackaging certain products.

Over the years, we have maintained a strong customer focus and have expanded our business by increasing our sales of value-added and specialty ingredients, including manufacturing, blending, and repackaging certain products.

Business Acquisitions

We completed the following acquisitions in fiscal 2024 and fiscal 2025.The results of operations since the date of each acquisition and the assets, including goodwill associated with these acquisitions, are included in our Water Treatment segment.

• On October 30, 2024, we acquired substantially all the assets of Water Guard for $18.0 million.

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

• On June 28, 2024, we acquired substantially all the assets of Wofford for $3.4 million.

We completed the following acquisitions in fiscal 2025 and the first quarter of fiscal 2026.The results of operations since the date of each acquisition and the assets, including goodwill associated with these acquisitions, are included in our Water Treatment segment.

• On June 13, 2025, we acquired substantially all the assets and assumed certain liabilities of Hendrickson and Polymer Tech for approximately $1.5 million.

Hendrickson distributed water treatment chemicals and equipment to its customers via direct shipments from suppliers.

• On April 24, 2025, we acquired substantially all of the assets and assumed certain liabilities of WaterSurplus and related entities for approximately $149.9 million paid at closing, with an additional amount payable as an earnout of up to $53.7 million based on cumulative gross profit for the first five years.

WaterSurplus is located in Rockford, IL and delivers sustainable water treatment solutions to customers throughout the United States.

• In the fourth quarter of fiscal 2025, we acquired substantially all the assets and assumed certain liabilities of Amerochem for $44.0 million.

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

• In the third quarter of fiscal 2025, we acquired substantially all the assets and assumed certain liabilities of Water Guard for $18.0 million.

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

• In the first quarter of fiscal 2025, we acquired substantially all the assets and assumed certain liabilities of Wofford for $3.4 million.

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

• On June 3, 2024, we acquired substantially all the assets of Intercoastal for $22.0 million.

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

• In the fourth quarter of fiscal 2024, we acquired substantially all the assets of Industrial Research for $4.6 million.

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

• In the third quarter of fiscal 2024, we acquired substantially all the assets of Miami Products for $15.5 million.

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

• In the third quarter of fiscal 2024, we acquired substantially all the assets of Water Solutions for $60 million and an additional amount to be paid after three years based on achieving certain targets.

The total purchase price was estimated to be $70.7 million, including the estimated potential earnout to be paid of $10.7 million.

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

• In the second quarter of fiscal 2024, we acquired substantially all the assets of EcoTech for $3.4 million.

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

The aggregate annual revenue of these seven businesses acquired in fiscal 2024 and fiscal 2025 totaled approximately $105 million, as determined using the applicable twelve-month period preceding each respective acquisition date.

Share Repurchase Program

We have in place a share repurchase program for up to 2.6 million shares of our common shares.

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

• In the first quarter of fiscal 2025, we acquired substantially all the assets and assumed certain liabilities of Intercoastal for $22.0 million.

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

The aggregate annual revenue of these six businesses acquired in fiscal 2025 and fiscal 2026 totaled approximately $102 million, as determined using the applicable twelve-month period preceding each respective acquisition date.

Subsequent to the end of our first quarter of fiscal 2026, we acquired substantially all the assets and assumed certain liabilities of PhillTech, LLC.

("PhillTech") for $5.0 million.

PhillTech is located in Courtland, AL, and manufactures and distributes coagulants and corrosion control products for its water treatment customers.

Change in Reporting Segments

Effective beginning with the first quarter of fiscal 2026, we realigned our reporting segments to reflect organizational changes made and to reflect the way we manage our operations and allocate resources.

We believe this realignment better reflects the value our company provides to our customers and our evolution from a bulk commodity distributor into a specialty ingredients company.

We now organize and manage our business by the following three segments, each of which meets the definition of reportable segments under ASC 280-10, Segment Reporting :

Water Treatment, Food & Health Sciences, and Industrial Solutions.

These segments are defined primarily by product and type of customer.

Information presented in this quarterly report has been recast to align with the new segments.

Additional information regarding these new segments is set forth in Note 13 - Segment Information.

Financial Results

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 Water Treatment and Industrial segments.

We focus on operating income 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.

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 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 Water Treatment and Industrial segments.

We use the last in, first out (“LIFO”) method of valuing the majority of our inventory, 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.

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

4 unchanged sentences

The following table sets forth the percentage relationship of certain items to sales for the period indicated:

Three Months Ended Nine Months Ended

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

Three Months Ended

June 29, 2025 June 30, 2024

Sales 100.0 % 100.0 %

4 unchanged sentences

Interest expense, net (1.1) % (0.5) %

Other (expense) income 0.2 % 0.4 % 0.2 % 0.1 %

Other income 0.3 % 0.1 %

Income before income taxes 13.3 % 15.2 %

1 unchanged sentence

Net income 9.9 % 11.4 %

Three Months Ended December 29, 2024 Compared to Three Months Ended December 31, 2023

Sales were $226.2 million for the three months ended December 29, 2024, an increase of $17.7 million, or 8%, from sales of $208.5 million in the same period a year ago.

Sales in our Water Treatment segment increased 22%, sales in our Health and Nutrition segment increased 3%, while sales in our Industrial segment decreased slightly.

Water Treatment Segment.

Water Treatment segment sales increased $17.8 million, or 22%, to $99.8 million for the three months ended December 29, 2024, from sales of $82.0 million in the same period a year ago.

Sales of bulk commodity products in the Water Treatment segment were approximately 9% of sales dollars for both the current quarter and in the same period a year ago.

Sales increased as a result of $12 million of added sales from acquired businesses as well as increased sales volumes in our legacy business.

Industrial Segment.

Industrial segment sales decreased $1.0 million, or 1%, to $92.0 million for the three months ended December 29, 2024, from sales of $93.0 million in the same period a year ago.

Sales of bulk commodity products in the Industrial segment were approximately 15% of sales dollars in the current quarter and 14% in the same period a year ago.

Sales decreased as a result of lower selling prices on certain products, driven by lower raw material costs, product mix changes and competitive pricing pressures.

Health & Nutrition Segment.

Health and Nutrition segment sales increased $1.0 million, or 3%, to $34.5 million for the three months ended December 29, 2024, from sales of $33.5 million in the same period a year ago.

Sales increased due to increased sales volumes of our manufactured products.

Gross profit increased $6.2 million, or 15%, to $48.4 million, or 21% of sales, for the three months ended December 29, 2024, from $42.2 million, or 20% of sales, in the same period a year ago.

During the current quarter, the LIFO reserve decreased,

and gross profit increased, by $0.8 million, primarily due to lower anticipated fiscal year-end prices on certain products.

In the same period a year ago, the LIFO reserve decreased, and gross profit increased, by $2.5 million.

Water Treatment Segment.

Gross profit for the Water Treatment segment increased $5.8 million, or 29%, to $26.0 million, or 26% of sales, for the three months ended December 29, 2024, from $20.2 million, or 25% of sales, in the same period a year ago.

During the current quarter, the LIFO reserve decreased, and gross profit increased, by $0.1 million.

In the same period a year ago, the LIFO reserve decreased, and gross profit increased, by $0.4 million.

Gross profit increased as a result of increased sales, including the increased sales from our acquired businesses.

Industrial Segment.

Gross profit for the Industrial segment decreased $1.3 million, or 8%, to $15.2 million, or 17% of sales, for the three months ended December 29, 2024, from $16.5 million, or 18% of sales, in the same period a year ago.

During the current quarter, the LIFO reserve decreased, and gross profit increased, by $0.6 million.

In the same period a year ago, the LIFO reserve decreased, and gross profit increased, by $2.1 million.

Gross profit decreased primarily as a result of product mix changes and the change in the LIFO reserve.

Health and Nutrition Segment .

Gross profit for our Health and Nutrition segment increased $1.7 million, or 31%, to $7.2 million, or 21% of sales, for the three months ended December 29, 2024, from $5.5 million, or 16% of sales, in the same period a year ago.

Gross profit increased as a result of the increased sales.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses increased $3.6 million, or 15%, to $27.4 million, or 12% of sales, for the three months ended December 29, 2024, from $23.8 million, or 11% of sales, in the same period a year ago.

Expenses increased largely due to $1.9 million in added costs from the acquired businesses in our Water Treatment segment, including amortization of intangibles of $0.8 million, as well as other increased variable costs.

Operating Income

Operating income increased $2.6 million, or 14%, to $21.1 million, or 9% of sales, for the three months ended December 29, 2024, from $18.5 million, or 9% of sales, in the same period a year ago due to the combined impact of the factors discussed above.

Interest Expense, Net

Interest expense was $1.2 million for both the three months ended December 29, 2024 and the same period a year ago.

Interest expense was flat year over year as an increase in outstanding borrowings in the current quarter, as compared to the same period a year ago, was offset by slightly lower interest rates.

Other income was $0.4 million for the three months ended December 29, 2024 compared to $0.9 million in the same period a year ago.

The income represents gains recorded on investments held for our non-qualified deferred compensation plan.

The amounts recorded as a gain were offset by similar amounts recorded as an increase to compensation expense within SG&A expenses.

Income Tax Provision

Our effective income tax rate was 26% for the three months ended December 29, 2024 and 18% for the same period a year ago.

The effective tax rate in the third quarter of both years was impacted by favorable tax provision adjustments recorded.

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

Our effective tax rate for the full year is expected to be approximately 26 to 27%.

Nine Months Ended December 29, 2024 Compared to Nine Months Ended December 31, 2023

Sales were $729.1 million for the nine months ended December 29, 2024, an increase of $33.0 million, or 5%, from sales of $696.1 million in the same period a year ago.

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

Three Months Ended June 29, 2025 Compared to Three Months Ended June 30, 2024

Sales were $293.3 million for the three months ended June 29, 2025, an increase of $37.4 million, or 15%, from sales of $255.9 million in the same period a year ago.

Each of our segments contributed to the year-over-year growth, as discussed below.

Water Treatment Segment.

Water Treatment segment sales increased $64.9 million, or 23%, to $341.5 million for the nine months ended December 29, 2024, from sales of $276.6 million in the same period a year ago.

Sales of bulk commodity products in the Water Treatment segment were approximately 9% of sales dollars in the current period and in the same period a year ago.

Sales increased as a result of added sales from acquired businesses as well as increased sales volumes in our legacy business.

Industrial Segment.

Industrial segment sales decreased $27.3 million or 9%, to $285.1 million for the nine months ended December 29, 2024, from sales of $312.4 million in the same period a year ago.

Sales of bulk commodity products in the Industrial segment were approximately 14% of sales dollars in the current period and 13% in the same period of the prior year.

Although overall volumes increased slightly year over year, sales decreased as a result of lower selling prices on certain of our products, driven by lower raw material costs, product mix changes and competitive pricing pressures.

Health & Nutrition Segment.

Health and Nutrition segment sales decreased $4.6 million, or 4%, to $102.5 million for the nine months ended December 29, 2024, from sales of $107.1 million in the same period a year ago.

Sales decreased due to lower sales of our manufactured products, driven by reduced volumes and selling prices due to decreased demand for certain of our products in the first two quarters of the year, offset somewhat by increased sales of our distributed products.

Gross profit increased $25.2 million, or 17%, to $173.3 million, or 24% of sales, for the nine months ended December 29, 2024, from $148.1 million, or 21% of sales, in the same period a year ago.

During the current period, the LIFO reserve decreased, and gross profit increased, by $0.3 million due primarily to lower anticipated fiscal year-end prices on certain products.

In the same quarter a year ago, the LIFO reserve decreased, and gross profit increased, by $6.0 million.

Water Treatment segment sales increased $32.4 million, or 28%, to $149.6 million for the three months ended June 29, 2025, from sales of $117.2 million in the same period a year ago.

Sales of bulk commodity products in the Water Treatment segment were approximately 8% of sales dollars in the current quarter and 9% in the same period a year ago.

Sales increased as a result of $29 million of added sales from acquired businesses as well as increased sales volumes and improved pricing on certain products in our legacy business.

Food & Health Sciences Segment.

Food & Health Sciences segment sales increased $4.1 million, or 5%, to $89.2 million for the three months ended June 29, 2025, from sales of $85.1 million in the same period a year ago.

Sales of our agricultural products increased $4.5 million due to increased volumes, offset partially by declines in our other product lines as a result of lower selling prices driven by competitive pricing pressures.

Industrial Solutions Segment.

Industrial Solutions segment sales increased $0.9 million, or 2%, to $54.5 million for the three months ended June 29, 2025, from sales of $53.6 million in the same period a year ago.

Sales of bulk commodity products in the Industrial Solutions segment were approximately 22% of sales dollars in both the current quarter and in the same period a year ago.

Sales increased primarily as a result of increased sales volumes of certain of our manufactured, blended and repackaged products.

Gross profit increased $7.7 million, or 12%, to $72.4 million, or 25% of sales, for the three months ended June 29, 2025, from $64.7 million, or 25% of sales, in the same period a year ago.

During the current quarter, the LIFO reserve increased, and gross profit decreased, by $0.6 million, primarily due to a projected increase in inventory costs and year-end inventory quantities.

In the same period a year ago, the LIFO reserve increased, and gross profit decreased, by $0.4 million.

Water Treatment Segment.

Gross profit for the Water Treatment segment increased $20.6 million, or 27%, to $96.6 million, or 28% of sales, for the nine months ended December 29, 2024, from $76.0 million, or 27% of sales, in the same period a year ago.

During the current period, the LIFO reserve increased, and gross profit decreased, slightly.

In the same quarter a year ago, the LIFO reserve decreased, and gross profit increased, by $0.9 million.

Gross profit for the Water Treatment segment increased $8.5 million, or 24%, to $43.7 million, or 29% of sales, for the three months ended June 29, 2025, from $35.2 million, or 30% of sales, in the same period a year ago.

During the current quarter, the LIFO reserve increased, and gross profit decreased, by $0.2 million.

In the same period a year ago, the LIFO reserve increased, and gross profit decreased, by $0.3 million.

Gross profit increased primarily as a result of increased sales from our acquired businesses.

Industrial Segment.

Gross profit for the Industrial segment increased $1.7 million, or 3% to $55.3 million, or 19% of sales, for the nine months ended December 29, 2024, from $53.6 million, or 17% of sales, in the same period a year ago.

During the current period, the LIFO reserve decreased, and gross profit increased, by $0.4 million.

In the same quarter a year ago, the LIFO reserve decreased, and gross profit increased, by $5.0 million.

Gross profit increased as a result of net favorable product mix changes.

Health and Nutrition Segment .

Gross profit for our Health and Nutrition segment increased $2.9 million, or 16%, to $21.4 million, or 21% of sales, for the nine months ended December 29, 2024, from $18.5 million, or 17% of sales, in the same period a year ago.

Gross profit increased as a result of product mix changes.

Step-up inventory adjustments of $0.8 million related to the WaterSurplus acquisition negatively impacted gross profit.

Food & Health Sciences Segment.

Gross profit for the Food & Health Sciences segment decreased $0.6 million, or 3%, to $19.3 million, or 22% of sales, for the three months ended June 29, 2025, from $19.9 million, or 23% of sales, in the same period a year ago.

During the current quarter, the LIFO reserve increased, and gross profit decreased, by $0.2 million.

During the prior year quarter, the LIFO reserve decreased, and gross profit increased, by $0.2 million.

Gross profit decreased primarily as a result of lower selling prices as a result of competitive pricing pressures.

Industrial Solutions Segment.

Gross profit for the Industrial Solutions segment decreased $0.2 million, or 2%, to $9.3 million, or 17% of sales, for the three months ended June 29, 2025, from $9.5 million, or 18% of sales, in the same period a year ago.

During the current quarter, the LIFO reserve increased, and gross profit decreased, by $0.2million.

In the same period a year ago, the LIFO reserve increased, and gross profit decreased, by $0.3 million.

Gross profit decreased primarily as a result of competitive pricing pressures and increased operating costs.

Selling, General and Administrative Expenses

SG&A expenses increased $14.5 million, or 23%, to $78.7 million, or 11% of sales, for the nine months ended December 29, 2024, from $64.2 million, or 9% of sales, in the same period a year ago.

Expenses increased primarily due to $9.0 million in added costs from the acquired businesses in our Water Treatment segment, including amortization of intangibles of $3.4 million as well as other increased variable costs.

Selling, general and administrative (“SG&A”) expenses increased $6.1 million, or 24%, to $31.0 million, or 11% of sales, for the three months ended June 29, 2025, from $24.9 million, or 10% of sales, in the same period a year ago.

Expenses increased largely due to $4.9 million in added costs from the acquired business in our Water Treatment segment, including amortization of intangibles of $2.0 million and $0.9 million of acquisition costs.

In addition, expenses increased due to $1.4 million of additional compensation expense related to our non-qualified deferred compensation plan and equity compensation adjustments due to stock market increases, as well as an increase in medical expenses.

The non-qualified deferred compensation expense increase of $0.8 million was offset in Other Income.

In the current quarter, we recorded a reduction to SG&A expense of $1.9 million related to the adjustment of the fair value accretion of the earnout related to the Water Solutions acquisition due to a change in projections.

SG&A expenses also increased due to increases in other variable costs, including variable pay and other personnel costs.

Operating Income

Operating income increased $10.6 million, or 13%, to $94.6 million, or 13% of sales, for the nine months ended December 29, 2024, from $84.0 million, or 12% of sales, in the same period a year ago due to the combined impact of the factors discussed above.

Operating income increased $1.5 million, or 4%, to $41.3 million, or 14% of sales, for the three months ended June 29, 2025, from $39.8 million, or 16% of sales, in the same period a year ago due to the combined impact of the factors discussed above.

Interest Expense, Net

Interest expense was $3.9 million for the nine months ended December 29, 2024 and $3.0 million the same period a year ago.

Interest expense increased due to an increase in outstanding borrowings in the current year as compared to a year ago as well as slightly higher interest rates.

Other income was $1.3 million for the nine months ended December 29, 2024 compared to $0.9 million in the same period a year ago.

Interest expense increased $2.0 million to $3.3 million for the three months ended June 29, 2025 compared to $1.3 million in the same period a year ago.

Interest expense increased due to increased borrowings in the current quarter, primarily to fund the acquisition of WaterSurplus.

Other income was $0.9 million for the three months ended June 29, 2025 compared to $0.2 million in the same period a year ago.

The income represents gains recorded on investments held for our non-qualified deferred compensation plan.

1 unchanged sentence

Income Tax Provision

Our effective income tax rate was 26% for the nine months ended December 29, 2024 and 25% in the same period a year ago.

The effective tax rate in the first nine months of the current year and the same period a year was impacted by favorable tax provision adjustments recorded.

Our effective income tax rate was approximately 25% for both of the three months ended June 29, 2025 and for the same period a year ago.

The effective tax rate in both years was impacted by favorable tax provision adjustments recorded.

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

Our effective tax rate for the full year is currently expected to be approximately 26 to 27%.

Our effective tax rate for the full year is expected to be approximately 26 to 27%.

Liquidity and Capital Resources

Cash was $8.3 million at December 29, 2024, an increase of $1.1 million as compared with the $7.2 million available as of March 31, 2024.

Cash provided by operating activities was $80.3 million for the nine months ended December 29, 2024, compared to cash provided by operating activities of $117.6 million in the same period a year ago.

The year-over-year decrease in cash provided by operating activities in the current period was primarily driven by unfavorable year-over-year changes in inventory and receivables, slightly offset by increased net income compared to the same period a year ago.

Cash was $14.5 million at June 29, 2025, an increase of $9.4 million as compared with the $5.1 million available as of March 30, 2025.

Cash provided by operating activities was $31.5 million for the three months ended June 29, 2025, compared to cash provided by operating activities of $17.6 million in the same period a year ago.

The year-over-year increase in cash provided by operating activities in the current period was primarily driven by favorable year-over-year changes in trade receivables and accounts payable compared to the same period a year ago.

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 investment and the resulting operating cash flow.

Cash u sed in investing activities was $72.8 million for the nine months ended December 29, 2024, compared to $106.4 million in the sam e period a year ago.

In the current period, we incurred acquisition spending of $43.4 million , with the acquisitions of Water Guard for $18.0 million, Intercoastal for $22.0 million and Wofford for $3.4 million.

Cash u sed in investing activities was $164.5 million for the three months ended June 29, 2025, compared to $35.8 million in the sam e period a year ago.

In the current period, we incurred acquisition spending of $151.3 million , with the acquisitions of WaterSurplus for approximately $149.9 million paid at closing, and Hendrickson for approximately $1.5 million.

Capital expenditures were $13.5 million for the current period, compared to $10.6 million in the same period a year ago.

In the current period, we purchased a building in Texas for $2.5 million and had more investments in equipment and containers, resulting in an increase in overall capital expenditures compared to the prior year.

In the prior year, we invested $5.1 million to complete an expansion of one of our Minnesota manufacturing facilities.

Cash used in financing activities was $6.3 million for the nine months ended December 29, 2024, compared to $13.1 million of cash used in financing activities in the same period a year ago.

Included in financing activities in the current period were net debt borrowing of $15.0 million, compared to net debt borrowing of $8.0 million in the same period a year ago.

In addition, we repurchased $9.1 million of our common stock in the current period, compared to $11.3 million in the same period of the prior year.

In the current period, we had more investments in transportation equipment and containers, resulting in an increase in overall capital expenditures compared to the prior year.

Cash provided by financing activities was $142.5 million for the three months ended June 29, 2025, compared to $20.0 million of cash used in financing activities in the same period a year ago.

Included in financing activities in the current period were net debt borrowings of $150.0 million, compared to net debt borrowings of $35.0 million in the same period a year ago.

We drew approximately $150 million of the proceeds from the Revolving Loan Facility for the acquisition of WaterSurplus.

In addition, we repurchased no common stock in the current period, compared to $9.1 million in the same period of the prior year.

We expect our cash balances and funds available under our credit facility, discussed below, along with cash flows generated from operations, will be sufficient to fund the cash requirements of our ongoing operations for the foreseeable future.

2 unchanged sentences

The primary objective of the share repurchase program is to offset the impact of dilution from issuances relating to employee and director equity grants and our employee stock purchase program.

During the nine months ended December 29, 2024, we repurchased 105,541 shares of common stock with an aggregate purchase price of $9.1 million.

During the three months ended June 29, 2025, we repurchased no shares of common stock.

In the same period a year ago, we repurchased 105,541 shares of common stock with an aggregate purchase price of $9.1 million.

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

We are party to a second amended and restated credit agreement (the “Credit Agreement”) with U.S.

As of June 29, 2025, 731,544 shares remained available to be repurchased under the share repurchase program.

We are party to a second amended and restated credit agreement with U.S.

Bank National Association (“U.S.

Bank”) as Sole Lead Arranger and Sole Book Runner, and other lenders from time to time party thereto (collectively, the “Lenders”), whereby U.S.

Bank is also serving as Administrative Agent.

The Credit Agreement refinanced the revolving loan under our previous credit agreement with U.S.

Bank and provides us with senior secured revolving credit facilities (the “Revolving Loan Facility”) totaling $250 million.

Bank”) as Administrative Agent, Sole Lead Arranger and Sole Book Runner, and the other lenders from time to time party thereto (collectively, the “Lenders”), dated as of March 31, 2022 (the “Existing Credit Agreement” and as amended, restated or modified from time to time, and as modified by the Amendment, the “Credit Agreement”).

The Joinder, Consent and Second Amendment to Second Amended and Restated Credit Agreement, dated April 25, 2025 increased the revolving commitment under the Existing Credit Agreement to provide us with senior secured revolving credit facilities (the “Revolving Loan Facility”) totaling $400.0 million.

The Revolving Loan Facility includes a $10.0 million letter of credit subfacility and $25.0 million swingline subfacility.

3 unchanged sentences

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.

2 unchanged sentences

The base rate margin is between 0.00% and 0.85%, depending on our leverage ratio.

At December 29, 2024, the effective interest rate on our borrowings was 4.2%.

At June 29, 2025, the effective interest rate on our borrowings was 4.9%.

In addition to paying interest on the outstanding principal under the Revolving Loan Facility, we are required to pay a commitment fee on the unutilized commitments thereunder.

1 unchanged sentence

Debt issuance costs paid to the Lenders are being amortized as interest expense over the term of the Credit Agreement.

As of December 29, 2024, 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 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.

As of June 29, 2025, the unamortized balance of these costs was $0.9 million, and is reflected as a reduction of debt on our balance sheet.

The Credit Agreement will require 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 its assets or rate management transactions, subject to certain limitations.

We are permitted to make distributions, pay dividends and repurchase shares so long as no default or event of default exists or would exist as a result thereof.

We were in compliance with all covenants of the Credit Agreement as of December 29, 2024 and expect to remain in compliance with all covenants for the next 12 months.

The Credit Agreement contains customary events of default, including failure to comply with covenants in the Credit Agreement and other loan documents, cross default to other material indebtedness, failure by us to pay or discharge material judgments, bankruptcy, and change of control.

We were in compliance with all covenants of the Credit Agreement as of June 29, 2025 and expect to remain in compliance with all covenants for the next 12 months.

The Credit Agreement contains customary events of default, the occurrence of which would permit the lenders to terminate their commitments and accelerate loans under the Revolving Loan Facility, including failure to make payments under the Revolving Loan Facility, failure to comply with covenants in the Credit Agreement and other loan documents, cross default to other material indebtedness, our failure to pay or discharge material judgments, bankruptcy, and change of control of the Company.

The occurrence of an event of default would permit the lenders to terminate their commitments and accelerate loans under the Credit Facility.

6 unchanged sentences

Critical Accounting Estimates

There were no material changes in our critical accounting estimates since the filing of our Annual Report on Form 10-K for the fiscal year ended March 31, 2024 .

There have been no material changes in our critical accounting estimates, as disclosed in our Annual Report on Form 10-K for fiscal 2025 .

Forward-Looking Statements

5 unchanged sentences

These factors could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

Additional information concerning potential factors that could affect future financial results is included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024 .

Additional information concerning potential factors that could affect future financial results is included in our Annual Report on Form 10-K for fiscal 2025 .

We caution you not to place undue reliance on these forward-looking statements, which reflect our management’s view only as of the date of this Quarterly Report on Form 10-Q.

1 unchanged sentence

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 2. Management’s Discussion and Analysis