WASHINGTON, D.C. 20549
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
HAWKINS, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HAWKINS, INC.
See accompanying notes to condensed consolidated financial statements.
HAWKINS, INC.
See accompanying notes to condensed consolidated financial statements.
HAWKINS, INC.
See accompanying notes to condensed consolidated financial statements.
HAWKINS, INC.
See accompanying notes to condensed consolidated financial statements.
HAWKINS, INC.
See accompanying notes to condensed consolidated financial statements.
HAWKINS, INC.
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 three and nine months ended December 27, 202026, 2021 and December 29, 2019:27, 2020:
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.
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). We classify the inputs used to measure fair value into the following hierarchy:
The following tables summarize the balances of assets and liabilities measured at fair value on a recurring basis as of December 27, 202026, 2021 and March 29, 2020.28, 2021.
The first in, first out (“FIFO”) value of inventories accounted for under the last in, first out (“LIFO”) method was $43.7$64.3 million at December 27, 202026, 2021 and $43.3$46.8 million at March 29, 2020.28, 2021. The remainder of the inventory was valued and accounted for under the FIFO method.
Note 1110 – 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 April 3, 20161, 2018 are closed to examination by the Internal Revenue Service, and with few exceptions, state and local
income tax jurisdictions. Our effective tax rate was approximately 26% for both the nine months ended December 26, 2021 and for the nine months ended December 27, 2020 was 26.1% and was 26.6% for the nine months ended December 29, 2019.2020. The effective tax rate is impacted by projected levels of annual taxable income, permanent items, and state taxes.
Note 1211 – Leases
Lease Obligations. As of December 27, 2020,26, 2021, we were obligated under operating lease agreements for certain manufacturing facilities, warehouse space, the land on which some of our facilities sit, vehicles and information technology equipment. Our leases have remaining original lease terms of 1 year to 2423 years, some of which include options to extend the lease for up to 10 years.
As of December 27, 2020,26, 2021, our operating lease components with initial or remaining terms in excess of one year were classified on the condensed consolidated balance sheet within right of use assets, short-term lease liability and long-term lease liability.
Expense for leases less than 12 months was not material for the three and nine months ended December 26, 2021 and December 27, 2020 was 0t material.2020. Total lease expense was $0.7 million for both the three months ended December 26, 2021 and December 27, 2020, and December 29, 2019. Total lease expensewas $2.1 million for both the nine months ended December 27, 202026, 2021 and December 29, 2019 was $2.1 million and $2.2 million, respectively.27, 2020.
Other information related to our operating leases was as follows:
| | | | | | | | |
| | December 27, 2020 |
Lease Term and Discount Rate | | |
Weighted average remaining lease term (years) | | 8.45 |
Weighted average discount rate | | 3.2 | % |
| | | | | | | | | | | |
| | December 26, 2021 | March 28, 2021 |
Lease Term and Discount Rate | | | |
Weighted average remaining lease term (years) | | 9.16 | 9.73 |
Weighted average discount rate | | 2.6 | % | 2.7 | % |
Maturities of lease liabilities as of December 27, 202026, 2021 were as follows:
| | | | | | | | |
(In thousands) | | Operating Leases |
Remaining fiscal 20212022 | | $ | 400 | |
Fiscal 2022 | | 1,750443 | |
Fiscal 2023 | | 1,6241,764 | |
Fiscal 2024 | | 1,2701,411 | |
Fiscal 2025 | | 1,2791,356 | |
Fiscal 2026 | | 1,297 | |
Thereafter | | 4,3376,335 | |
Total | | $ | 10,66012,606 | |
Less: Interest | | (2,366)(1,536) | |
Present value of lease liabilities | | $ | 8,29411,070 | |
Note 1312 – 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 20212022 and fiscal 2020.2021. 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 0zero shares and 62,38588,524 shares in the aggregate for fiscal 2021.2022. 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 nine months ended December 27, 2020:26, 2021: | | | | | | | | | | | | | | |
| | Shares | | Weighted- Average Grant Date Fair Value |
Unvested at beginning of period | | 239,120 | | | $ | 17.94 | |
Granted | | 111,618 | | | 31.74 | |
Vested | | (123,002) | | | 17.25 | |
| | | | |
Unvested at end of period | | 227,736 | | | $ | 25.08 | |
| | | | | | | | | | | | | | |
| | Shares | | Weighted- Average Grant Date Fair Value |
Unvested at beginning of period | | 74,515 | | | $ | 34.27 | |
Granted | | 64,813 | | | 37.37 | |
Vested | | (5,263) | | | 31.35 | |
Forfeited or expired | | (14,505) | | | 35.83 | |
Unvested at end of period | | 119,560 | | | $ | 35.89 | |
We recorded compensation expense related to performance share units and restricted stock of $0.8 million and $2.0 million for the three and nine months ended December 26, 2021, respectively. We recorded compensation expense related to performance share units and restricted stock of $0.7 million and $1.6 million for the three and nine months ended December 27, 2020, respectively. We recorded compensation expense related to performance share units and restricted stock of $0.5 million and $1.3 million for the three and nine months ended December 29, 2019, 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 retainers, each director who is not an executive officer receives an annual grant ofretainer, our non-employee directors receive restricted stock for their service on our Board.Board services. The restricted stock awards are generally expensed over the requisitea one-year vesting period, which is generally one year from the date of issuance, based on the market value on the date of grant. As of December 27, 2020,26, 2021, there were 6,59310,287 shares of restricted stock with an average grant date fair value of $51.17$32.80 outstanding under this program. Compensation expense for both the three months ended December 27, 202026, 2021 and December 29, 201927, 2020 related to restricted stock awards to the Board was $0.1 million. Compensation expense for both the nine months ended December 27, 202026, 2021 and December 29, 201927, 2020 related to restricted stock awards to the Board was $0.2 million.
Note 1413 – Share Repurchase Program
Our Board has authorized the repurchase of up to 800,0001.6 million shares of our outstanding common stock for cash on the open market or in privately negotiated transactions subject to applicable securities laws and regulations. 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 December 26, 2021, we repurchased 30,538 shares at an aggregate purchase price of $1.1 million. During the nine months ended December 26, 2021, we repurchased 240,501 shares at an aggregate purchase price of $8.5 million. During the three and nine months ended December 27, 2020, we repurchased 83,044166,088 shares at an aggregate purchase price of $4.1 million. During the three months ended December 29, 2019, 0 shares were repurchased. During the nine months ended December 29, 2019, we repurchased 91,395 shares at an aggregate purchase price of $3.8 million. As of December 27, 2020, 275,75326, 2021, 311,005 shares remained available to be repurchased under the share repurchase program.
Note 15 – Litigation, Commitments and Contingencies
Litigation. There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which we or any of our subsidiaries are a party or of which any of our property is the subject. Legal fees associated with such matters are expensed as incurred.
Note 1614 – Segment Information
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. Other than our Health and Nutrition segment, the segments do not have separate accounting, administration, customer service or purchasing functions. We allocate certain corporate expenses to our operating segments. There are no intersegment sales and 0no 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 December 27, 2020: | | | | | | | | |
Sales | | $ | 64,356 | | | $ | 39,298 | | | $ | 39,273 | | | $ | 142,927 | |
Gross profit | | 9,207 | | | 10,027 | | | 9,005 | | | 28,239 | |
Selling, general, and administrative expenses | | 6,978 | | | 6,788 | | | 3,984 | | | 17,750 | |
Operating income | | 2,229 | | | 3,239 | | | 5,021 | | | 10,489 | |
Three months ended December 29, 2019: | | | | | | | | |
Sales | | $ | 63,018 | | | $ | 34,890 | | | $ | 22,498 | | | $ | 120,406 | |
Gross profit | | 8,418 | | | 8,362 | | | 4,698 | | | 21,478 | |
Selling, general, and administrative expenses | | 6,050 | | | 4,834 | | | 3,818 | | | 14,702 | |
Operating income | | 2,368 | | | 3,528 | | | 880 | | | 6,776 | |
Nine months ended December 27, 2020: | | | | | | | | |
Sales | | $ | 197,029 | | | $ | 128,552 | | | $ | 108,319 | | | $ | 433,900 | |
Gross profit | | 32,100 | | | 35,888 | | | 24,024 | | | 92,012 | |
Selling, general and administrative expenses | | 19,474 | | | 17,654 | | | 11,881 | | | 49,009 | |
Operating income | | 12,626 | | | 18,234 | | | 12,143 | | | 43,003 | |
Nine months ended December 29, 2019: | | | | | | | | |
Sales | | $ | 206,433 | | | $ | 124,010 | | | $ | 77,342 | | | $ | 407,785 | |
Gross profit | | 30,007 | | | 33,206 | | | 15,056 | | | 78,269 | |
Selling, general and administrative expenses | | 18,041 | | | 14,956 | | | 11,358 | | | 44,355 | |
Operating income | | 11,966 | | | 18,250 | | | 3,698 | | | 33,914 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | Industrial | | Water Treatment | | Health and Nutrition | | Total |
Three months ended December 26, 2021: | | | | | | | | |
Sales | | $ | 100,554 | | | $ | 49,756 | | | $ | 36,740 | | | $ | 187,050 | |
Gross profit | | 15,303 | | | 11,103 | | | 7,534 | | | 33,940 | |
Selling, general, and administrative expenses | | 7,367 | | | 8,254 | | | 4,060 | | | 19,681 | |
Operating income | | 7,936 | | | 2,849 | | | 3,474 | | | 14,259 | |
Three months ended December 27, 2020: | | | | | | | | |
Sales | | $ | 64,356 | | | $ | 39,298 | | | $ | 39,273 | | | $ | 142,927 | |
Gross profit | | 9,207 | | | 10,027 | | | 9,005 | | | 28,239 | |
Selling, general, and administrative expenses | | 6,978 | | | 6,788 | | | 3,984 | | | 17,750 | |
Operating income | | 2,229 | | | 3,239 | | | 5,021 | | | 10,489 | |
Nine months ended December 26, 2021: | | | | | | | | |
Sales | | $ | 269,572 | | | $ | 168,105 | | | $ | 113,891 | | | $ | 551,568 | |
Gross profit | | 42,121 | | | 44,855 | | | 23,225 | | | 110,201 | |
Selling, general and administrative expenses | | 20,064 | | | 22,721 | | | 11,431 | | | 54,216 | |
Operating income | | 22,057 | | | 22,134 | | | 11,794 | | | 55,985 | |
Nine months ended December 27, 2020: | | | | | | | | |
Sales | | $ | 197,029 | | | $ | 128,552 | | | $ | 108,319 | | | $ | 433,900 | |
Gross profit | | 32,100 | | | 35,888 | | | 24,024 | | | 92,012 | |
Selling, general and administrative expenses | | 19,474 | | | 17,654 | | | 11,881 | | | 49,009 | |
Operating income | | 12,626 | | | 18,234 | | | 12,143 | | | 43,003 | |
No significant changes to identifiable assets by segment occurred during the nine months ended December 27, 2020.
Note 1715 – Subsequent Events
On December 30, 2020,2021, we acquired substantially all the assets of C & L Aqua Professionals,NAPCO Chemical Company, Inc. and LC
Blending, Inc. (together, “C&L Aqua”its affiliates ("NAPCO") for $16$18.5 million, subject to a working capital adjustment, under the terms of an asset purchase agreement among us, C&L AquaNAPCO and its shareholders. C&L Aqua is acertain other parties thereto. NAPCO manufactures and distributes water treatment chemical distribution company operating primarilychemicals from three locations in Louisiana.Texas. The results of operations and the assets, including the goodwill associated with this acquisition, 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.
ITEM 2. 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 27, 202026, 2021 as compared to the similar period ended December 29, 2019.27, 2020. 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 29, 202028, 2021. Overview
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 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.
Business and Property Acquisitions
On December 30, 2020,2021, after the end of our third quarter, we acquired substantially all the assets of NAPCO Chemical Company, Inc. and its affiliates ("NAPCO") under the terms of an asset purchase agreement among us, NAPCO and certain other parties thereto. NAPCO manufactures and distributes water treatment chemicals from three locations in Texas. The results of operations beginning at the date of acquisition will be included as part of our Water Treatment segment from the date of acquisition forward.
On October 29, 2021, we acquired substantially all the assets of Water and Waste Specialties, LLC, under the terms of an asset purchase agreement with Water and Waste Specialties and its shareholders. Water and Waste Specialties was a water treatment chemical distribution company operating primarily in Alabama. The results of operations since the acquisition date are included in our Water Treatment segment.
On September 20, 2021, we acquired substantially all the assets of Southeast Water Systems LLC, under the terms of an asset purchase agreement with Southeast Water Systems and its shareholders. Southeast Water Systems supplied and installed water treatment chemical equipment to its customers located primarily in Alabama, southern Georgia and the Florida panhandle. The results of operations since the acquisition date are included in our Water Treatment segment.
In the fourth quarter of fiscal 2021, we acquired substantially all the assets of C & L&L Aqua Professionals, Inc. and LC Blending, Inc. (together, “C&L Aqua”) under the terms of an asset purchase agreement among us, C&L Aqua and its shareholders. C&L Aqua iswas a water treatment chemical distribution company operating primarily in Louisiana. The results of operations and the assets will beare included as part of our Water Treatment segment from the date of acquisition forward.segment.
In the thirdsecond quarter of fiscal 2021, we acquired a manufacturing facility to allow further expansion and growth in both our Industrial and Water Treatment segments. This site is adjacent to our facility in Rosemount, Minnesota, adding 40,000 square feet of manufacturing and warehouse space on 28 acres of land to bring us to a total of 105,000 square feet of space on 56 acres of land in the area, with rail access at both of the sites to allow for future growth and provide for supply chain flexibility on certain raw materials to better serve the customer.
On July 28, 2020, we acquired substantially all the assets of American Development Corporation of Tennessee, Inc. (“ADC”) under the terms of an asset purchase agreement among us, ADC and its shareholders. ADC iswas a water treatment chemical distribution company operating primarily in Tennessee, Georgia and Kentucky. The results of operations since the acquisition date are included in our Water Treatment segment.
The aggregate annual revenue from C&L Aqua and ADCof the three businesses acquired in the twelve months prior to our acquisitionscurrent fiscal year totaled approximately $25$17 million, as determined using the applicable twelve-month period preceding each respective acquisition date.
Stock Split
In the fourth quarter of fiscal 2021, we effected a two-for-one split of our common stock, and adjusted the par value from $0.05 per share to $0.01 per share. At the same time, we increased the number of authorized shares from 30 million to 60 million. Our consolidated financial statements, related notes, and other financial data contained in this report have been adjusted to give retroactive effect to the aggregate.stock split for all periods presented.
Statement on COVID-19
TheDuring the pandemic caused by COVID-19, has resulted in federal, state and local governments around the world implementingimplemented stringent measures to help control the spread of the virus, including, from time to time, quarantines, “shelter in place” and “stay at home” orders, travel restrictions or bans, business curtailments, school closures, and other protective measures. While somemost restrictions have eased since the starestart of the COVID-19 pandemic, certain restrictions remain in place or new restrictions may be implemented in the future. Restrictions will likely remain in place for some time. Financial markets have been volatile, primarily due to uncertainty with respect to the severity and duration of the pandemic.
All of our manufacturing facilities have qualified as essential operations (or the equivalent) under applicable federal and state orders. As a result, all of our manufacturing sites and facilities have continued to operate, with no significant impact to ouroutput levels. We are enforcing social distancing and enhanced health, safety and sanitization measures in accordance with guidelines from the Center for Disease Control. We have also implemented necessary procedures and support to enable a significant portion of our office personnel to work remotely.
During this public health crisis, we remainremained focused on the health and safety of our employees, customers and suppliers and maintaining safe and reliable operations of our manufacturing sites. As our operations and products are essential to critical national infrastructure, it is imperative that we continue to supply materials including the products needed to maintain safe drinking water, ingredients essential for large-scale food, pharmaceutical and other health product manufacturing and nutrition products needed to support our country's critical infrastructure. Our manufacturing sites have continued to operate during the COVID-19 pandemic, with no significant impact to manufacturing.
We ended the third quarter of fiscal 2021 with a leverage ratio of 1.2x, net debt of $88 million and $54 million available for borrowing under our Revolving Loan Facility.
The financial impact of the COVID-19 pandemic to our company has been mixed, as sales to certain end-markets such as food, bottled bleach and health and nutrition have benefited our reporting segments, while decreased sales to other end-markets such as ethanol, pools and resorts have negatively impacted them. In addition, certain expenses, such as travel and entertainment and trade show expenses, have been lower than historical levels during fiscal 2021. As uncertainty continues with this pandemic, we expect mixed results to continue for the foreseeable future.
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, particularly in our Industrial and Water Treatment segments, as raw material costs 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 LIFO method for valuing the majority of our inventory in our Industrial and Water Treatment segments, which causes the most recent product costs for those products to be recognized in our income statement. The valuation of LIFO inventory for interim periods is based on our estimates of fiscal year-end inventory levels and costs. 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 the Health and Nutrition segment are valued using the 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. 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.
Results of Operations
The following table sets forth the percentage relationship of certain items to sales for the period indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | December 26, 2021 | | December 27, 2020 | | December 26, 2021 | | December 27, 2020 |
Sales | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % |
Cost of sales | | (81.9) | % | | (80.2) | % | | (80.0) | % | | (78.8) | % |
| | | | | | | | |
Gross profit | | 18.1 | % | | 19.8 | % | | 20.0 | % | | 21.2 | % |
Selling, general and administrative expenses | | (10.5) | % | | (12.4) | % | | (9.8) | % | | (11.3) | % |
Operating income | | 7.6 | % | | 7.4 | % | | 10.2 | % | | 9.9 | % |
Interest expense, net | | (0.2) | % | | (0.3) | % | | (0.2) | % | | (0.3) | % |
Other income | | 0.1 | % | | 0.3 | % | | 0.1 | % | | 0.3 | % |
Income before income taxes | | 7.5 | % | | 7.4 | % | | 10.1 | % | | 9.9 | % |
Income tax expense | | (2.1) | % | | (1.9) | % | | (2.6) | % | | (2.6) | % |
Net income | | 5.4 | % | | 5.5 | % | | 7.5 | % | | 7.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | December 27, 2020 | | December 29, 2019 | | December 27, 2020 | | December 29, 2019 |
Sales | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % |
Cost of sales | | (80.2) | % | | (82.2) | % | | (78.8) | % | | (80.8) | % |
| | | | | | | | |
Gross profit | | 19.8 | % | | 17.8 | % | | 21.2 | % | | 19.2 | % |
Selling, general and administrative expenses | | (12.4) | % | | (12.2) | % | | (11.3) | % | | (10.9) | % |
Operating income | | 7.4 | % | | 5.6 | % | | 9.9 | % | | 8.3 | % |
Interest expense, net | | (0.3) | % | | (0.5) | % | | (0.3) | % | | (0.5) | % |
Other income | | 0.3 | % | | 0.1 | % | | 0.3 | % | | 0.1 | % |
Income before income taxes | | 7.4 | % | | 5.2 | % | | 9.9 | % | | 7.9 | % |
Income tax expense | | (1.9) | % | | (1.5) | % | | (2.6) | % | | (2.1) | % |
Net income | | 5.5 | % | | 3.7 | % | | 7.3 | % | | 5.8 | % |
Three Months Ended December 27, 202026, 2021 Compared to Three Months Ended December 29, 201927, 2020
Sales
Sales were $142.9$187.1 million for the current quarter,three months ended December 26, 2021, an increase of $22.5$44.2 million, or 19%31%, from sales of $120.4$142.9 million in the same period a year ago.
Industrial Segment. Industrial segment sales increased $1.4$36.2 million, or 2%56%, to $64.4$100.6 million for the current quarter, as compared to $63.0three months ended December 26, 2021, from sales of $64.4 million in the same period a year ago. Sales of bulk commodity products in the Industrial segment were approximately 16% of sales dollars in both the current quarterthree months ended December 26, 2021 and 18% in the same period of the prior year. The increase in Industrial segment sales dollars from the prior year was driven largelyprimarily by a product mix shift to moreincreased sales volumes of both our bulk and our manufactured, blended and repackaged products. The increase included sales of certain of our higher-priced manufactured, blendedagricultural products lines due in large part due to both favorable crop prices and repackaged products.early purchases as customers anticipated additional price increases later in the season. Sales also increased due to increased selling prices driven by higher costs on many of our raw materials.
Water Treatment Segment. Water Treatment segment sales increased $4.4$10.5 million, or 13%27%, to $39.3$49.8 million for the current quarter, as compared to $34.9 million in the same period a year ago. Sales of bulk commodity products in the Water Treatment segment were approximately 10% of sales dollars in the current quarter and 12% in the same period of the prior year. The increase in sales dollars from the prior year was largely attributable to added sales from the acquisition of ADC. Sales by our legacy business also increased overall due to increased sales of our manufactured, blended and repackaged products.
Health & Nutrition Segment. Health and Nutrition segment sales increased $16.8 million, or 75%, to $39.3 million for the current quarter, as compared to $22.5 million in the same period a year ago. The increase in sales was driven by increased sales of both our manufactured and specialty distributed products largely as a result of increased consumer demand for health and immunity products.
Gross Profit
Gross profit increased $6.7 million, or 31%, to $28.2 million, or 20% of sales, for the current quarter, from $21.5 million, or 18% of sales, for the same period a year ago. During the current quarter, the LIFO reserve increased, and gross profits decreased, by $0.1 million. In the same quarter a year ago, the LIFO reserve decreased, and gross profits increased, by $0.3 million.
Industrial Segment. Gross profit for the Industrial segment increased $0.8 million, or 9%, to $9.2 million, or 14% of sales, for the current quarter, from $8.4 million, or 13% of sales, in the same period of the prior year. During the current quarter, the change in the LIFO reserve had a nominal impact on gross profit. In the same quarter a year ago, the LIFO reserve decreased, and gross profits increased, by $0.2 million. Total gross profit, and gross profit as a percentage of sales, decreased due to a product mix shift to more sales of certain higher-margin manufactured, blended and repackaged products.
Water Treatment Segment. Gross profit for the Water Treatment segment increased $1.6 million, or 20%, to $10.0 million, or 26% of sales, for the current quarter, from $8.4 million, or 24% of sales, in the same period of the prior year. During the current and prior year quarters, the change in the LIFO reserve had a nominal impact on gross profit. Gross profit increased as a result of the added gross profit from the sales in the acquired ADC business, as well as the increased sales of manufactured, blended and repackaged products in our legacy business. Gross profit as a percentage of sales increased as a result of product mix changes.
Health and Nutrition Segment. Gross profit for our Health and Nutrition segment increased $4.3 million, or 92%, to $9.0 million, or 23% of sales, for the current quarter, from $4.7 million, or 21% of sales, for the same period of the prior year. The increase in gross profit was a result of higher sales compared to the prior year. Gross profit as a percentage of sales increased as a result of product mix changes.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses increased $3.1 million to $17.8 million, or 12% of sales, for the current quarter, from $14.7 million, or 12% of sales, for the same period of the prior year. Expenses increased primarily due to an increase in variable costs, primarily variable compensation, added costs from the acquired ADC business, including amortization of intangibles, and acquisition expenses. In addition, we recorded a year-over-year expense increase of $0.3 million due to higher compensation expense relating to the non-qualified deferred compensation plan liability which is offset in other income as described below. These increases were partially offset by a decrease in travel and trade show expenses due to restrictions imposed as a result of COVID-19.
Operating Income
Operating income increased $3.7 million, or 55%, to $10.5 million, or 7% of sales, for the current quarter, from $6.8 million, or 6% of sales, for the same period of the prior year due to the combined impact of the factors discussed above.
Interest Expense, Net
Interest expense was $0.4 million for the current quarter, a decrease of $0.2 million from interest expense of $0.6 million for the same period a year ago. Interest expense decreased due to lower outstanding borrowings compared to the prior year.
Other Income
Other income increased $0.4 million from the same period a year ago, with $0.5 million recorded in the current quarter, from $0.1 million in the same period of the prior year. This amount represents gains recorded on investments held for our non-qualified deferred compensation plan. The amount recorded as a gain was offset by a similar amount recorded as an increase to compensation expense within SG&A expenses.
Income Tax Provision
Our effective income tax rate was 25.2% for the current quarter, compared to 28.1% in the same period of the prior year. The effective tax rate decreased from the prior year due to favorable tax provision adjustments recorded in the third quarter of fiscal 2021. The effective tax rate is impacted by projected levels of annual taxable income, permanent items, and state taxes.
Nine Months Ended December 27, 2020 Compared to Nine Months Ended December 29, 2019
Sales
Sales were $433.9 million for the ninethree months ended December 27, 2020, an increase of $26.1 million, or 6%,26, 2021, from sales of $407.8$39.3 million for the same period a year ago.
Industrial Segment. Industrial segment sales decreased $9.4 million, or 5%, to $197.0 million for the nine months ended December 27, 2020, as compared to $206.4 million for the same period a year ago. Sales of bulk commodity products in the Industrial segment were approximately 14% of sales dollars in the current year and 18% in the same period of the prior year. The decrease in sales dollars from the prior year was driven largely by weakened economic conditions in the ethanol industry, which decreased sales of products into that industry in the first half of the year. In addition, the decrease in sales dollars when compared to the prior year was partially attributable to temporarily higher sales in the first quarter of the prior year attributable to heavy rains and flooding along the Mississippi River, which increased demand from certain customers. These year-over-year sales decreases were partially offset by increased sales of certain of our manufacturing, blended and repackaged products, largely our food ingredient, pharmaceutical, and bleach products as a result of increased demand.
Water Treatment Segment. Water Treatment segment sales increased $4.5 million, or 4%, to $128.6 million for the nine months ended December 27, 2020, as compared to $124.0 million for 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 yearthree months ended December 26, 2021 and 11% a year ago. The increase10% in sales dollars resulted primarily from the added sales fromsame period of the acquisition of ADC and was largely offset by a first quarter sales decline due to reduced sales to certain end markets, primarily public pools,prior year. Sales increased as a result of shutdowns due to the COVID-19 pandemic.increased demand for many of our products, as well as $3.1 million in added sales from acquired businesses.
Health & Nutrition Segment. Health and Nutrition segment sales increased $31.0decreased $2.6 million, or 40%7%, to $108.3$36.7 million for the ninethree months ended December 27, 2020, as compared to $77.326, 2021, from sales of $39.3 million forin the same period a year ago. The decrease in sales was primarily driven by decreased sales of our manufactured products when compared to strong demand for those products in the prior year, partially offset by an increase in sales was driven by increased sales of both our manufactured and specialty distributed products largely as a result of increased consumer demand for health and immunity products.
Gross Profit
Gross profit increased $13.7$5.7 million, or 18%20%, to $92.0$33.9 million, or 21%18% of sales, for the ninethree months ended December 27, 2020,26, 2021, from $78.3$28.2 million, or 19%20% of sales, for the same period a year ago. During the current year,three months ended December 26, 2021, the LIFO reserve decreased,increased, and gross profits increased,profit decreased, by $0.1 million.$2.9 million, primarily due to rising raw material prices. In the same periodquarter a year ago, the LIFO reserve decreased,increased, and gross profits increased,profit decreased, by $0.6$0.1 million.
Industrial Segment. Gross profit for the Industrial segment increased $2.1$6.1 million, or 7%66%, to $32.1 million, or 16% of sales, for the nine months ended December 27, 2020, from $30.0$15.3 million, or 15% of sales, for the three months ended December 26, 2021, from $9.2 million, or 14% of sales, in the same period a year ago. During the current year,three months ended December 26, 2021, the LIFO reserve decreased,increased, and gross profits increased,profit decreased, by $0.1 million.$2.2 million, primarily due to rising raw material prices. In the same periodquarter a year ago, the change in the LIFO reserve decreased, andhad a nominal impact on gross profitsprofit. Gross profit increased by $0.5 million. Total gross profit, and gross profit as a percentageresult of the increase in sales, increased due to a product mix shift to more salespartially offset by the negative impact of higher-margin manufactured, blended and re-packaged products.the increase in the LIFO reserve.
Water Treatment Segment. Gross profit for the Water Treatment segment increased $2.7$1.1 million, or 8%11%, to $35.9$11.1 million, or 28%22% of sales, for the ninethree months ended December 27, 2020,26, 2021, from $33.2$10.0 million, or 27%26% of sales, forin the same period a year ago. During the currentthree months ended December 26, 2021, the LIFO reserve increased, and gross profit decreased, by $0.6 million. In the same quarter a year changesago, the change in the LIFO reserve had a nominal impact on gross profits. In the same period a year ago, the LIFO reserve decreased, and gross profits increased by $0.1 million.profit. Gross profit increased as a result of the increase in sales, including the added gross profitsales from the salesacquired businesses, partially offset by the negative $0.6 million year-over-year impact of the increase in the acquired ADC business, as well as a product mix shift in our legacy business to more sales of manufactured, blended and repackaged products.LIFO reserve. Gross profit as a percentage of sales increased as a result of product mix changes.declined in part due to rising raw material costs and our inability in some cases to pass cost increases on to customers with contracts in place.
Health and Nutrition Segment. Gross profit for our Health and Nutrition segment increased $8.9decreased $1.5 million, or 60%16%, to $24.0$7.5 million, or 22%21% of sales, for the ninethree months ended December 27, 2020,26, 2021, from $15.1$9.0 million, or 20%23% of sales, for the same period a year ago. The increasedecrease in gross profit was a result of higher sales compared to the prior year. Gross profit as a percentage of sales increased as a result of product mix changes.year-over-year decline in sales.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A&A”) expenses increased $4.6$1.9 million or 11% to $49.0$19.7 million, or 11% of sales, for the ninethree months ended December 27, 2020, compared to $44.426, 2021, from $17.8 million, or 11%12% of sales, for the same priorperiod a year period.ago. Expenses increased primarilyin part due to an increase in variable costs, primarily variable compensation,the added costs from the acquired ADC business,businesses in our Water Treatment segment, including $0.1 million of expense for amortization of intangibles, as well as increased variable pay expense and acquisition expenses. In addition, we recordedincreased travel expense. Increased expenses were partially offset by a year-over-year expense increasedecrease of $1.0$0.4 million due to higherlower compensation expense relating to the non-qualified deferred compensation plan liability which is offset in other income as described below. These increases were partially offset by a decrease in travel and trade show expenses due to restrictions imposed as a result of COVID-19.
Operating Income
Operating income increased $9.1$3.8 million, or 27%36%, to $43.0 million, or 10% of sales, for the nine months ended December 27, 2020, from $33.9$14.3 million, or 8% of sales, for the three months ended December 26, 2021, from $10.5 million, or 7% of sales, for the same priorperiod a year periodago due to the combined impact of the factors discussed above.
Interest Expense, Net
Interest expense decreased $0.9 million, to $1.1was $0.3 million for the ninethree months ended December 26, 2021 and $0.4 million the three months ended December 27, 2020, from $2.0 million for2020. Additional interest cost as a result of the same period a year ago. Interest expense decreased due toincrease in outstanding borrowings was more than offset by lower borrowing rates compared to the prior year.
Other Income
Other income increased $1.0 million, to $1.3was $0.1 million for the ninethree months ended December 27, 2020, from $0.326, 2021 and $0.5 million in the same period a year ago. This represents gains recorded on investments held for our non-qualified deferred compensation plan. The amount recorded as a gain was offset by a similar amount recorded as an increase to compensation expense within SG&A expenses.expenses.
Income Tax Provision
Our effective income tax rate was 27% for the ninethree months ended December 27, 2020was 26.1%,26, 2021, compared to 26.6%25% in the same period of the prior year.a year ago. 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 26-27%.
Nine Months Ended December 26, 2021 Compared to Nine Months Ended December 27, 2020
Sales
Sales were $551.6 million for the nine months ended December 26, 2021, an increase of $117.7 million, or 27%, from sales of $433.9 million in the same period a year ago.
Industrial Segment. Industrial segment sales increased $72.6 million, or 37%, to $269.6 million for the nine months ended December 26, 2021, from sales of $197.0 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 nine months ended December 26, 2021 and 14% in the same period of the prior year. The increase in Industrial segment sales was driven primarily by increased sales volumes of both our bulk and our manufactured, blended and repackaged products. The increase included sales of certain of our agricultural products lines due in large part due to both favorable crop prices and early purchases as customers anticipated additional price increases later in the season. Sales also increased due to increased selling prices driven by higher costs on many of our raw materials.
Water Treatment Segment. Water Treatment segment sales increased $39.6 million, or 31%, to $168.1 million for the nine months ended December 26, 2021, from sales of $128.6 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 both the nine months ended December 26, 2021 and the same period in the prior year. Sales increased as a result of increased demand for many of our products, as well as $14.7 million in added sales from acquired businesses.
Health & Nutrition Segment. Health and Nutrition segment sales increased $5.6 million, or 5%, to $113.9 million for the nine months ended December 26, 2021, from sales of $108.3 million in the same period a year ago. The increase in sales was driven by increased sales of our specialty distributed products partially offset by the decrease in sales of our manufactured products when compared to the strong demand for those products in the prior year.
Gross Profit
Gross profit increased $18.2 million, or 20%, to $110.2 million, or 20% of sales, for the nine months ended December 26, 2021, from $92.0 million, or 20% of sales, in the same period a year ago. During the nine months ended December 26, 2021, the LIFO reserve increased, and gross profit decreased, by $7.6 million, primarily due to rising raw material costs. In the same period a year ago, the LIFO reserve decreased, and gross profit increased, by $0.1 million.
Industrial Segment. Gross profit for the Industrial segment increased $10.0 million, or 31%, to $42.1 million, or 16% of sales, for the nine months ended December 26, 2021, from $32.1 million, or 16% of sales, in the same period a year ago. During the nine months ended December 26, 2021, the LIFO reserve increased, and gross profit decreased, by $5.9 million, primarily due to rising raw material costs. In the same period a year ago, the LIFO reserve decreased, and gross profit increased, by $0.1
million. Gross profit increased as a result of the increase in sales, partially offset by the negative impact resulting from the increase in the LIFO reserve.
Water Treatment Segment. Gross profit for the Water Treatment segment increased $9.0 million, or 25%, to $44.9 million, or 27% of sales, for the nine months ended December 26, 2021, from $35.9 million, or 28% of sales, in the same period a year ago. During the nine months ended December 26, 2021, the LIFO reserve increased, and gross profit decreased, by $1.7 million. In the same period a year ago, the change in the LIFO reserve had a nominal impact on gross profit. Gross profit increased as a result of the increase in sales, including the added sales from the acquired businesses.
Health and Nutrition Segment. Gross profit for our Health and Nutrition segment decreased $0.8 million, or 3%, to $23.2 million, or 20% of sales, for the nine months ended December 26, 2021, from $24.0 million, or 22% of sales, in the same period a year ago. The decrease in gross profit was a result of product mix changes as well as inventory adjustments of approximately $1.0 million due to increased reserves for excess product on hand, in accordance with our reserve policies.
Selling, General and Administrative Expenses
SG&A expenses increased $5.2 million to $54.2 million, or 10% of sales, for the nine months ended December 26, 2021, from $49.0 million, or 11% of sales, in the same period a year ago. Expenses increased in part due to the added costs from the acquired businesses in our Water Treatment segment, including $0.7 million of expense for amortization of intangibles, as well as increased variable pay expense and increased travel expense. Increased expenses were partially offset by a year-over-year decrease of $0.8 million due to lower compensation expense relating to the non-qualified deferred compensation plan liability which is offset in other income as described below.
Operating Income
Operating income increased $13.0 million, or 30%, to $56.0 million, or 10% of sales, for the nine months ended December 26, 2021, from $43.0 million, or 10% 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 $1.0 million for the nine months ended December 26, 2021 and $1.1 million the nine months ended December 27, 2020. Additional interest cost as a result of the increase in outstanding borrowings was more than offset by lower borrowing rates compared to the prior year.
Other Income
Other income was $0.5 million for the nine months ended December 26, 2021 and $1.3 million in the same period a year ago. This represents gains recorded on investments held for our non-qualified deferred compensation plan. The amount recorded as a gain was offset by a similar amount recorded as an increase to compensation expense within SG&A expenses.
Income Tax Provision
Our effective income tax rate was 26% for both the nine months ended December 26, 2021 and in the same period a year ago. 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 26-27%.
Liquidity and Capital Resources
Cash was $8.0$23.4 million at December 27, 2020,26, 2021, an increase of $3.7$20.4 million as compared with the $4.3$3.0 million available as of March 29, 2020.28, 2021. Generally we expect cash to be lower at the end of a quarter as debt is paid down, but due to the NAPCO acquisition closing occurring within a few days after quarter end the funds were borrowed within the quarter.
Cash provided by operating activities was $26.6$38.7 million for the nine months ended December 27, 2020,26, 2021, compared to cash provided by operating activities of $45.0$26.6 million forin the same period of the prior year.a year ago. The year-over-year decreaseincrease in cash provided by operating activities was primarily driven by increasesan increase in net income combined with year-over-year changes in uses of working capital, including less cash expended in the first nine months of the current year for accounts payable, partially offset by an increase in inventory and customer receivables offset by an increase in net income for the first nine months of fiscalended December 26, 2021 compared to the same period a year ago. Increased customer demand in our Health and Nutrition segment resulted in a significant increase in on-hand inventory due to increased stocking levels to fill the increased demand and to offset longer lead times from our suppliers for many products. Due to the nature of our operations, which includes purchases of large quantities of bulk chemicals, timing of purchases can result in significant changes in working capital investment and the resulting operating cash flow. Typically, our cash requirements increase during the period from April through November as caustic soda inventory levels increase because we receive the majority of barges during this period.
Cash used in investing activities was $48.1$18.0 million for the nine months ended December 27, 2020,26, 2021, compared to $19.1$48.1 million forin the same period of the prior year. In the nine months ended December 27, 2020, we acquired ADC for $25 million.a year ago. Capital expenditures were $13.2$15.7 million for the nine months ended December 27, 2020, 26, 2021,
compared to $19.4$13.2 million in the same period of the prior year.a year ago. In the first nine months of the current year, we purchased a manufacturing facility on 28 acres to allow further expansionhad larger investments in containers and growth in both our Industrial and Water Treatment segments for $10 million,replacement equipment compared to the purchases of our previously leased corporate headquarters facility for $6.4 million and a Water Treatment facility for $0.8 million in the first nine months of the prior year. Acquisition spending was $2.6 million in the current year compared to $35.0 million in the same period of the prior year.
Cash provided byused in financing activities was $25.1$0.2 million for the nine months ended December 27, 2020,26, 2021, compared to $27.8$25.1 million of cash used inprovided by financing activities in the same period of the prior year.a year ago. Included in financing activities in the first nine months of the current year were net debt proceeds of $36.0$17.0 million, used in part for the acquisition of ADC, compared to net debt repaymentsproceeds of $17$36.0 million in the first nine months of the prior year. In addition, we repurchased $4.1$8.5 million of shares of our common stock in the first nine months of the current fiscal year, compared to $3.8$4.1 million shares repurchased in the same period in the prior year.a year ago.
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.
Our Board has authorized the repurchase of up to 800,0001.6 million shares of our outstanding common stock. The shares may be purchased on the open market or in privately negotiated transactions subject to applicable securities laws and regulations. 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 first nine months of fiscalended December 26, 2021, we repurchased 83,044240,501 shares of common stock with an aggregate purchase price of $4.1$8.5 million. InDuring the first nine months of the
prior fiscal year, weended December 27, 2020, 166,088 shares were repurchased 91,395 shares of common stock with an aggregate purchase price of $3.8$4.1 million. As of December 27, 2020, 275,75326, 2021, 311,005 shares remained available for purchaseto be repurchased under the program
share repurchase program.
We are party to an amended and restated credit agreement (the “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 provides us with senior secured revolving credit facilities (the “Revolving Loan Facility”) totaling $150.0 million. The Revolving Loan Facility includes a $5.0 million letter of credit subfacility and $15.0 million swingline subfacility. The Revolving Loan Facility has a five-year maturity date, maturing on November 30, 2023. The Revolving Loan Facility is secured by substantially all of our personal property assets and those of our subsidiaries.
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) LIBOR for an interest period of one, two, three or nine 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. S. Bank’s prime rate, (2) the Federal Funds Effective Rate plus 0.5%, or (3) one-month LIBOR for U.S. dollars plus 1.0%. The LIBOR margin is between 0.85% - 1.35%, depending on our leverage ratio. The base rate margin is between 0.00% - 0.35%, depending on our leverage ratio. In the event that the ICE Benchmark Administration (or any person that takes over administration of such rate) determines that LIBOR is no longer available, including as a result of the intended phase out of LIBOR by the end of 2021, our Revolving Loan Facility provides for an alternative rate of interest to be jointly determined by us and U.S. Bank, as administrative agent, that gives due consideration to the then prevailing market convention for determining a rate of interest for syndicated loans in the United States. Once such successor rate has been approved by us and U.S. Bank, the Revolving Credit Loan Facility would be amended to use such successor rate without any further action or consent of any other lender, so long as the administrative agent does not receive any objection from any other lender. At December 27, 2020,26, 2021, the effective interest rate on our borrowings was 1.4%0.9%.
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. The commitment fee is between 0.15% - 0.25%, depending on our leverage ratio.
Debt issuance costs paid to the Lenders are being amortized as interest expense over the term of the Credit Agreement. As of December 27, 2020,26, 2021, the unamortized balance of these costs was $0.3$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 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 27, 2020.26, 2021.
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. The occurrence of an event of default would permit the Lenders to terminate their commitments and accelerate loans under the Revolving Loan Facility.
As part of our growth strategy, we have acquired businesses and may pursue acquisitions or other strategic relationships in the future that we believe will complement or expand our existing businesses or increase our customer base. 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.
Critical Accounting Estimates
Forward-Looking Statements
The information presented in this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. These statements are not historical facts, but rather are based on our current expectations, estimates and projections, and our beliefs and assumptions.
Words such as “anticipate,” “believe,” “estimate,”, “expect,” “intend,” “plan,” “will” and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control and are difficult to predict. 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 29, 202028, 2021. 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. We are not obligated to update these statements or publicly release the result of any revisions to them to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are subject to the risk inherent in the cyclical nature of commodity chemical prices. However, we do not currently purchase forward contracts or otherwise engage in hedging activities with respect to the purchase of commodity chemicals. We attempt to pass changes in the cost of our materials to our customers. However, there are no assurances that we will be able to pass on the increases in the future.
We are exposed to market risks related to interest rates. Our exposure to changes in interest rates is limited to borrowings under our Revolving Loan Facility. A 25-basis point change in interest rates would potentially increase or decrease our annual interest expense by approximately $0.1$0.2 million.
Other types of market risk, such as foreign currency risk, do not arise in the normal course of our business activities.
ITEM��ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, we conducted an evaluation, under supervision and with the participation of management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Exchange Act. Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of December 27, 2020.26, 2021. Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control
There was no change in our internal control over financial reporting during the third quarter of fiscal 20212022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which we or any of our subsidiaries are a party or of which any of our property is the subject.
ITEM 1A. RISK FACTORS
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
As previously announced, our Board has authorized the repurchase of up to 800,0001,600,000 shares of our outstanding common stock. The shares may be purchased on the open market or in privately negotiated transactions subject to applicable securities laws and regulations. The following table sets forth information concerning purchases of our common stock for the three months ended December 27, 2020:26, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program | | Maximum Number of Shares that May Yet be Purchased under Plans or Programs |
09/28/2020-10/25/2020 | | — | | | $ | — | | | — | | | 358,797 | |
10/26/2020-11/22/2020 | | 83,044 | | | 49.89 | | | 83,044 | | | 275,753 | |
11/23/2020-12/27/2020 | | — | | | — | | | — | | | 275,753 | |
Total | | 83,044 | | | | | 83,044 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program | | Maximum Number of Shares that May Yet be Purchased under Plans or Programs |
09/27/2021-10/24/2021 | | — | | | | | — | | | 341,543 | |
10/25/2021-11/21/2021 | | — | | | | | — | | | 341,543 | |
11/22/2021-12/26/2021 | | 30,538 | | | 36.83 | | | 30,538 | | | 311,005 | |
Total | | 30,538 | | | | | 30,538 | | | |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
| | | | | | | | | | | | | | |
Exhibit | | Description | | Method of Filing |
3.1 | | | | | Incorporated by Reference |
3.2 | | | | | Incorporated by Reference |
31.1 | | | | | Filed Electronically |
31.2 | | | | | Filed Electronically |
32.1 | | | | | Filed Electronically |
32.2 | | | | | Filed Electronically |
101 | | | Financial statements from the Quarterly Report on Form 10-Q of Hawkins, Inc. for the period ended December 27, 202026, 2021 filed with the SEC on January 28, 2021February 2, 2022 formatted in Inline Extensible Business Reporting Language (iXBRL); (i) the Condensed Consolidated Balance Sheets at December 27, 202026, 2021 and March 29, 2020,28, 2021, (ii) the Condensed Consolidated Statements of Income for the three and nine months ended December 27, 202026, 2021 and December 29, 2019,27, 2020, (iii) the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended December 27, 202026, 2021 and December 29, 2019,27, 2020, (iv) the Condensed Consolidated Statements of Shareholder's Equity for the three and nine months ended December 27, 202026, 2021 and December 29, 2019,27, 2020, (v) the Condensed Consolidated Statements of Cash Flows for the nine months ended December 27, 202026, 2021 and December 29, 2019,27, 2020, and (vi) Notes to Condensed Consolidated Financial Statements. | | Filed Electronically |
104 | | | Cover Page Interactive Data File (embedded within the inline XBRL document) | | Filed Electronically |
(1)Incorporated by reference to Exhibit 3.13.2 to the Company’s QuarterlyCurrent Report on Form 10-Q for the period ended June 30, 2010,8-K dated February 26, 2021 and filed on July 29, 2010 (File no. 000-07647).March 2, 2021.
(2)Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated October 28, 2009 and filed November 3, 2009 (File no. 000-07647).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | |
HAWKINS, INC. | |
| | |
By: | | /s/ Jeffrey P. Oldenkamp | |
| | Jeffrey P. Oldenkamp | |
| | Executive Vice President and Chief Financial Officer | |
| | (On behalf of the registrant and as principal financial and accounting officer) | |
Dated: January 28, 2021February 2, 2022