HWKN 10-K & 10-Q changes, risk factors and insider trading

We operate in a highly competitive industry and compete with producers, manufacturers, distributors and sales agents offering products equivalent to substantially all of the products we offer. Competition is based on several key criteria, including product price, product performance, product quality, product availability and security of supply, breadth of product offerings, geographic reach, responsiveness of product development in cooperation with customers, technical expertiseexpertise, timeliness of delivery, and customer service. Many of our competitors are larger than we are and may have greater financial resources, more product offerings and a broader geographic reach. As a result, these competitors may be able to offer a broader array of products to a larger geographic area and may be better able than us to withstand changes in conditions within our industry, changes in the prices and availability of raw materials and changes in general economic conditions as well as be able to introduce innovative products that reduce demand forfor, or the profit fromfrom, our products. Additionally, competitors’ pricing decisions could compel us to decrease our prices, which could adversely affect our margins and profitability. Our ability to maintain or increase our profitability would be dependent upon our ability to offset competitive decreases in the prices and margins of our products by improving production efficiency, investing in infrastructure to reduce freight costs, identifying and selling higher margin products, providing higher levels of technical expertise and customer service, and improving existing products through innovation and research and development. If we are unable to maintain our profitability or competitive position, we could lose market share to our competitors and experience reduced profitability.

The repackaging, blending, mixing and distribution of products by us, including chemical products and products used in food or food ingredients or with medical, pharmaceuticalpharmaceutical, agricultural or dietary supplement applications, involve an inherent risk of exposure to product liability claims, product recalls, product seizures and related adverse publicity, including, without limitation, claims for exposure to our products, spills or release of our products, personal injuries, food-related claims and property damage or environmental claims. A product liability claim, judgment or recall against our customers could also result in substantial and unexpected expenditures for us, affect consumer confidence in our products and divert management’s attention from other responsibilities. Although we maintain product liability insurance, there can be no assurance that the type or level of coverage is adequate or that we will be able to continue to maintain our existing insurance or obtain comparable insurance at a reasonable cost, if at all. A product recall or a partially or completely uninsured judgment against us could have a material adverse effect on our business, financial condition and results of operations.

Our products are used for a broad range of applications by our customers. Changes in our customers’ product needs or processes, or reductions in demand for their end products, may enable or require our customers to reduce or eliminate consumption of the products that we provide. Customers may also find alternative materials or processes that no longer require our products. Consequently, it is important that we develop new products to replace the sales of products that mature and decline in use. There can be no assurance that we will be able to develop any new products in a timely or cost-effective manner.

Our products provide important performance attributes to our customers’ products. If our products fail to meet the customers’ requirements orrequirements, comply with applicable laws or regulations, perform in a manner inconsistentconsistent with the customers’ expectations, or have athe shorterrequired useful life than required,life, a customer could seek replacement of the product or damages for costs incurred as a result of the product failure. A successful claim or series of claims against us could have a material adverse effect on our financial condition and results of operations and could result in a loss of one or more customers. Reductions in demand for our products could adversely affect our sales and financial results and result in facility closures.

Information technology system failures, network disruptions and breaches of data security due to internal or external factors including phishing or cyber-attacks could disrupt our operations by causing delays or cancellation of customer orders, impede the manufacture or shipment of products or cause standard business processes to become ineffective, resulting in the unintentional disclosure of information orinformation, damage to our reputation.reputation, additional expenses or loss of sales. While we have taken steps to address these concerns by implementing network security and internal control measures, including employee training, comprehensive monitoring of our networks and systems, maintenance of backup and protective systems and disaster recovery and incident response plans, our employees, systems, networks, products, facilities and services remain vulnerable to phishing attacks and cyber-assault, and, as such, there can be no assurance that a system failure, network disruption or data security breach will not have a material adverse effect on our business, financial condition, operating results or cash flows.

We experience regular and recurring fluctuations in the pricing of our raw materials. Those fluctuations can be significant and occur rapidly. The cyclicality of commodity markets, such as the market for caustic soda, primarily results from changes in the balance between supply and demand and the level of general economic activity. In addition, tariffs imposed by the United States or other countries could substantially impact the price or supply of raw materials. WeThese cannotfluctuations predict whether the markets for our raw materials will favorably impact ormay negatively impact the margins we can realize.

We are also dependent upon the availability of our raw materials. In the event that raw materials are in short supply or unavailable, raw material suppliers may extend lead timestimes, delay shipments or limit or cut off supplies. As a result, we may not be able to supply or manufacture products for some or all of our customers. Constraints on the supply or delivery of critical raw materials could disrupt our operations and adversely affect the performance of our businesses.

We are subject to federal, state and local environmental regulations regarding the ownership of real property and the operations conducted on real property. Under various federal, state and local laws, ordinances and regulations, we may own or operate real property or may have arranged for the disposal or treatment of hazardous or toxic substances at a property and, therefore, may become liable for the costs of removal or remediation of certain hazardous substances released on or in our property or disposed of by us, as well as certain other potential costs which could relate to hazardous or toxic substances (including governmental fines and claims for injuries to persons and property). Such liability may be imposed whether or not we knew of, or were responsible for, the presence of these hazardous or toxic substances. Further, future changes in environmental laws or regulations may require additional investment in capital equipment or the implementation of additional compliance programs in the future. The cost of investigation, remediation or removal of such substances may be substantial.

Our Water Treatment Group and our agricultural product sales within our IndustrialFood and Health Sciences Group are subject to seasonality and weather conditions, which could adversely affect our results of operations.

Our Water Treatment Groupsegment has historically experienced higher sales during April to September, primarily due to a seasonal increase in chemicals used by municipal water treatment facilities and pools. Our agricultural product sales within our IndustrialFood and Health Sciences Group are also seasonal, primarily corresponding with the planting season. Demand in both of these areas is also affected by weather conditions, as either higher or lower than normal precipitation or temperatures may affect water usage and the timing and the amount of consumption of our products. In addition, demand for our agricultural products is also impacted by crop prices. We cannot assure you that seasonality or fluctuating weather conditions or crop prices will not have a material adverse effect on our results of operations.

We have been, and could continue to be, adversely affected by disruptions within our supply chain and transportation network. The raw materials we need are transported by truck, rail, or barge or ship by third-party providers. The costs of transporting our products or necessary raw materials could be negatively affected by factors outside of our control, including rail service interruptions or rate or fuel surcharge increases, extreme weather events, tariffs, charges placed on incoming vessels or railcars, rising fuel costs and capacity constraints. In recent years, unprecedentedUnprecedented congestion in ocean shipping has adversely impacted the reliability of our imported raw materials, and transport driver shortages have caused extended lead times for domestic shipments. In addition, rail shipments can be unreliable, with significant delays in service and increased costs. The impacts of high-profile derailments could further degrade service levels and cause railroads to increase costs.costs, especially for shipments of our hazardous products. Significant delays or increased costs relating to transportation could materially affect our financial condition and results of operations.

Similar supply chain issues have impacted and could continue to impact both our suppliers and our customers. The supply of our necessary raw materials could be interrupted due to shortages of raw materials, effects of economic, political or financial market conditions on a supplier's operations, labor disputes or weather conditions affecting products or shipments, transportation disruptions, natural disasters, outbreaks of disease, information system disruptions or other reasons beyond our control. Similar disruptions at our customers could reduce demand for our products, reducing our sales and profitability. Product shortages or delays in deliveries, along with other factors such as price inflation and higher transportation and fuel costs, have also resulted in price increases from our suppliers. We may be unable to pass these price increases on to our customers, which could erode our profit margins. These supply chain constraints, increased product costs and inflationary pressures could continue or escalate in the future, which would have an adverse impact on our business and results of operations.

Although we maintain a number of owned trucks and trailers, we rely heavily upon transportation provided by third parties (including common carriers, barge companies, rail companies and trans-ocean cargo companies) to deliver products to us and to our customers. Our access to third-party transportation is not guaranteed, and we may be unable to transport our products in a timely manner, or at all, in certain circumstances, or at economically attractive rates. Disruptions in transportation are common, are often out of our control, and can happen suddenly and without warning. Bulk chlorine, a critical product we repackage and use to make bleach, can only be feasibly shipped to us by rail. Rail companies, however, have been imposing increasing limitations on shipments of toxic inhalation hazards like chlorine. These limitations include increased charges and insurance requirements and rail tariffs that transfer liability for shipments in transit to the rail shipper. Any of these limitations may increase our costs or negatively impact our ability to receive products, such as chlorine, by rail. Other rail limitations, such as limitations in rail capacity, availability of railcars, workforce shortages, threats of strikes, derailments, embargoes and adverse weather conditions have disrupted or delayed rail shipments in the past and could do so in the future. Barge shipments are delayed or impossible under certain circumstances, including during times of high or low water levels, when waterways are frozen and when locks and dams are inoperable. The availability and reliability of truck transportation have been negatively impacted by a number of factors, including limited availability of qualified drivers and equipment, limitations on drivers’ hours of service and failures of critical infrastructure, such as bridges and rail lines. The volumes handled by, and operating challenges at, ocean ports have at times been volatile and can delay the receipt of goods or cause the cost of shipping goods to be more expensive. Our failure to ship or receive products in a timely and efficient manner could have a material adverse effect on our financial condition and results of operations.

Natural disasters have the potential of interrupting our operations and damaging our properties, which could adversely affect our businesses. Flooding of the Mississippi River has temporarily shifted the Company’s terminal operations out of its buildings four times since the spring of 2010, including most recently the spring of 2019.2010. We can give no assurance that flooding or other natural disasters will not recur or that there will not be material damage or interruption to our operations in the future from such disasters.

New or increased tariffs or other trade barriers imposed by governments, including the United States, could dramatically increase costs and delivery times within our supply chain. Certain of our business lines, such as our health and nutrition products, are dependent upon the import of key raw materials from a wide variety of international sources. In addition, many domestic suppliers rely on imported raw materials or parts for their production. Tariffs or other trade barriers could adversely affect our ability to source and import raw materials effectively, the cost of import and domestic products and our relative position compared to competitors that may not be adversely impacted to the same extent, whether due to exclusive domestic sources or alignment with favorable jurisdictions. Our domestic suppliers, who may not be directly impacted by tariffs or other trade barriers, may also opportunistically increase prices or experience shortages in supply as competitors seek to switch to domestic suppliers. Additionally, uncertainty inspired by the threat of changes in international trade policy could delay or reduce demand for our products. We are unable to accurately predict the duration and extent to which tariffs may impact our businesses.

We lease the land where our three main terminals are located and where another significant manufacturing plant is located. These leases, including all renewal periods, have expiration dates from 20252029 to 2044, one of which withrenews an annual renewal period.annually. The failure to secure extended lease terms on any one of these facilities may have a material adverse impact on our business, as they are where a portion of our chemicals are manufactured and where the majority of our bulk chemicals are stored. While we can make no assurances, based on historical experience and anticipated future needs, we intend to extend these leases and believe that we will be able to renew our leases as the renewal periods expire. If we are unable to renew three of our leases (two relate to terminals and one to manufacturing) any property remaining on the land becomes the property of the lessor, and the lessor has the option to either maintain the property or remove the property at our expense. The fourth lease provides that we turn any property remaining on the land over to the lessor for them to maintain or remove at their expense. The cost to relocate our operations could have a material adverse effect on our results of operations and financial condition.

In addition, we operate a fleet of approximately 400 commercial vehicles,vehicles with power units, primarily in our Water Treatment Group,segment, which are highly regulated, including by the DOT. The DOT governs transportation matters including authorization to engage in motor carrier service, including the necessary permits to conduct our businesses, equipment operation, and safety. We are audited periodically by the DOT to ensure that we are in compliance with various safety, hazardous materials, hours-of-service, and other rules and regulations. If we were found to be out of compliance, the DOT could severely restrict or otherwise impact our operations, which could have a material adverse effect on our operations as a whole, including our results of operations and cash flows.

We are party to a second amended and restated credit agreement, as amended (the “Credit Agreement”), with U.S. Bank National Association ("U.S. Bank") and other lenders (collectively, the “Lenders”), which includes 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 a $25.0 million swingline subfacility. At March 30,29, 2025,2026, we had $149$244 million outstanding under the Revolving Loan Facility.

The following is a discussion and analysis of our financial condition and results of operations for fiscal 20252026, 2025, and 2024. This discussion should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

•Gross profit of $225.5$245.1 million, an increase of $31.9$19.5 million, or 16%9% from fiscal 20242025; and

•DilutedOperating earningscash per share (EPS)flow of $4.03,$144.3 million, an increase of $0.44,$33.2 million, or 12%,30% from fiscal 2024.2025; and

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

We use the last in, first out (“LIFO”) method of valuing the majority of our inventory in our Water Treatment and Industrial segments,inventory, which causes the most recent product costs to be recognized in our incomeconsolidated statement.statements of income. 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 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. We disclose the percentage of our overall sales that consist of sales of bulk commodity products as these products are generally distributed and we do not add significant value to these products in comparison to our non-bulk products. Sales of these products are generally highly competitive and price sensitive. As a result, bulk commodity products generally have our lowest margins.

•On OctoberAugust 30,29, 2024,2025, we acquired substantially all the assets and assumed certain liabilities of Waterguard,StillWaters Technology, Inc. ("Water GuardStillWaters") underfor the$4.3 termsmillion. of a purchase agreement with Water Guard and its shareholders. Water GuardStillWaters distributed water treatment chemicals and equipment tofor its customers primarily throughout North Carolina. The results of operations since the acquisition date and the assets are included in our Water Treatment segment.Alabama.

The aggregate annual revenue of these foursix businesses acquired in fiscal 20252026 totaled approximately $67$48 million, as determined using the applicable twelve-month period preceding each respective acquisition date.

Sales were $974.4 million for fiscal 2025, an increase of $55.2 million, or 6%, from sales of $919.2 million for fiscal 2024. The year-over-year increase was driven by sales growth in our Water Treatment segment, while sales in our IndustrialFood and Health Sciences and NutritionIndustrial Solutions segments declined year over year.

Water Treatment Segment. Water Treatment segment sales increased $83.2 million, or 23%, to $446.5 million for fiscal 2025, as compared to $363.3 million for fiscal 2024. Sales of bulk commodity products in the Water Treatment segment were approximately 9% of sales dollars in both fiscal 2025 and fiscal 2024. Sales increased as a result of $72$72.1 million of added sales from acquired businesses as well as increased sales volumes of 5% in our legacy business.

HealthFood and NutritionHealth Sciences Segment. HealthFood and NutritionHealth Sciences segment sales decreased $0.9$12.0 million, or 1%,4%, to $145.5$322.6 million for fiscal 2025, as compared to $146.4$334.6 million for fiscal 2024. An increase in salesSales of our distributedFood products wasdecreased largely$11.1 offsetmillion bydue to decreased salesselling of our manufactured products. The overall decrease in sales of our manufactured products wasprices driven by decreasedcompetitive salespricing of a lower-margin product.pressures.

Water Treatment Segment. Gross profit for the Water Treatment segment increased $23.1$22.8 million, or 23%, to $121.6$121.8 million, or 27% of sales, for fiscal 2025, from $98.5$99.1 million, or 27% of sales, for fiscal 2024. During fiscal 2025, the LIFO reserve decreased, and gross profits increased, by $0.5 million. During fiscal 2024, the LIFO reserve decreased, and gross profit increased, by $3.3 million. Gross profit increased as a result of the increased sales.

HealthFood and NutritionHealth Sciences Segment. Gross profit for our HealthFood and NutritionHealth Sciences segment increased $3.7$4.0 million, or 13%,6%, to $31.3$71.9 million, or 22% of sales, for fiscal 2025, from $27.6$67.9 million, or 19%20% of sales, for fiscal 2024. Gross profit increased as a result of athe favorable$3.3 productmillion mixenvironmental shift.liability recorded in fiscal 2024.

Interest expense was $5.4 million for fiscal 2025, an increase of $1.2 million from interest expense of $4.3 million for fiscal 2024. Interest expense increased due to higher outstanding borrowings in thefiscal current year,2025, primarily to fund current year acquisitions.

Cash provided by operating activities in fiscal 20252026 was $111.1$144.3 million compared to $159.5$111.1 million in fiscal 2024.2025. The decreaseincrease in cash provided by operating activities in fiscal 20252026 as compared to fiscal 20242025 was primarily driven by increasesfavorable year-over-year changes in customerinventories and trade receivables ascompared to the same period a resultyear of higher sales, as well as higher inventory levels, partially offset by an increase in net income.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. Historically, our cash requirements for working capital increase during the period from March through November as inventory levels increase as most of our barges are received during this period.

Cash used in investing activities was $224.1 million in fiscal 2026 compared to $128.0 million in fiscal 2025 compared to $122.5 million in fiscal 2024.2025. Capital expenditures for property, plant and equipment were $58.2 million in fiscal 2026 and $41.1 million in fiscal 20252025. The increase in capital expenditures was primarily driven by real estate purchases and $40.2expansion millionof inexisting facilities. In fiscal 2024.2026, Cashwe used in investing activities included Water Treatment groupincurred acquisition spending of $87.4$167.1 million, including the acquisition of WaterSurplus for $149.9 million inpaid fiscalat 2025closing, compared to $83.5$87.4 million of acquisition spending in fiscal 2024.2025.

Cash usedprovided inby financing activities was $78.6 million in fiscal 2026 compared to $14.8 million in fiscal 20252025. comparedCash toprovided $37.4by financing activities included net debt borrowings of $95.0 million in fiscal 2024.2026 Cash used in financing activities includedand net debt borrowings of $50.0 million in fiscal 2025 and net debt repayments of $13.0 million in fiscal 2024.2025. We paid out cash dividends of $15.7 million in fiscal 2026 and $14.6 million in fiscal 2025 and $13.2 million in fiscal 2024.2025. In fiscal 2025,2026, we useddid $20.7 million tonot repurchase shares under our board-authorized share repurchase program, and in fiscal 2024,2025, we used $11.3$20.7 million to repurchase shares under the program.

Our cash balance was $5.1$3.9 million at March 30,29, 2025,2026, a decrease of $2.1$1.2 million as compared with March 31,30, 2024.2025. Cash flows generated by operations during fiscal 20252026 were offset by the cash expended for acquisitions, capital expenditures, repayments of debt, and dividend payments and share repurchases in fiscal 2025.2026. We intentionally maintain a relatively low level of cash and use excess cash to reduce outstanding debt, which we believe represents a more efficient use of capital by lowering interest expense, improving cash flow, and strengthening our balance sheet, while continuing to maintain sufficient liquidity to meet our operational and contractual needs.

We are party to thea Creditsecond Agreementamended and restated credit agreement with U.S. Bank National Association (“U.S. Bank”) as administrative agent, sole lead arranger and sole book runner, and the other lenders whichfrom providestime to time party thereto (collectively, the “Lenders”), dated as of March 31, 2022 (as amended, restated or modified from time to time, the “Credit Agreement”). A Joinder, Consent and Second Amendment, dated April 25, 2025 increased the revolving commitment under the Credit Agreement to provide us with senior secured revolving credit facilities (the “Revolving Loan Facility”) totaling $400.0 million. A Third Amendment, dated October 15, 2025, modified terms to increase the permitted qualified receivables transactions to $10.0 million from $5.0 million, as defined in the Credit Agreement. The Revolving Loan Facility includes a $10$10.0 million letter of credit subfacility and $25$25.0 million swingline subfacility. The Revolving Loan Facility has a five-year maturity date, maturing on April 25, 2030. The Revolving Loan Facility is secured by substantially all of our personal property assets and those of our subsidiaries. We may use the amount available under the Revolving Loan Facility for working capital, capital expenditures, share repurchases, restricted payments and acquisitions permitted under the Credit Agreement, and other general corporate purposes. At March 30,29, 2025,2026, we had $149$244 million outstanding under the Revolving Loan Facility.

The following is a discussion and analysis of our financial condition and results of operations for the three and nine months ended DecemberJune 28, 20252026 as compared to the similar period ended DecemberJune 29, 2024.2025. 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 Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended March 30,29, 2025.2026.

We derive substantially all of our revenues from the sale of water treatment solutions,treatment, specialty ingredients, and chemicalschemistry products to our customers in a wide variety of industries. We beganbelieve that we create value for our operationscustomers primarilythrough assuperb a distributor of bulk chemicals with a strong customer focus. Over the years, we have maintained a strong customer focusservice and havesupport, expandedquality ourproducts, businesspersonalized by increasing our sales of value-addedapplications and specialty ingredients, including manufacturing, blending,trustworthy, and repackagingcreative certain products.employees.

We completed the following acquisitions in fiscal 2025 and the first nine monthsquarter of fiscal 2027 and 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 with the exception of the MakWood lactate businessbusiness, which is included in our Food & Health Sciences segment. Certain acquisitions discussed below are not included in Note 2 to our Condensed Consolidated Financial Statements as they were not deemed to be material enough to warrant disclosure.

The aggregate annual revenue of thesethe tenseven businesses acquired in fiscal 2025 andduring fiscal 2026 and the first quarter of fiscal 2027 totaled approximately $116$52.3 million, as determined using the applicable twelve-month period preceding each respective acquisition date.

We focus on total 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.fall, particularly in our Water Treatment and Industrial Solutions segments. The costs for certain of our raw materials can rise or fall rapidly, causing fluctuations in gross profit as a percentage of sales.

Three Months Ended DecemberJune 28, 20252026 Compared to Three Months Ended DecemberJune 29, 20242025

Sales were $244.1$315.7 million for the three months ended DecemberJune 28, 2025,2026, an increase of $17.9$22.4 million, or 8%, from sales of $226.2$293.3 million in the same period a year ago. SalesAll inof our Water Treatment and Industrial Solutions segments both grew by more than 10%,5% whileas salescompared into ourthe Foodprior & Health Sciences segment decreased 10%.year.

Water Treatment Segment. Water Treatment segment sales increased $20.7$8.7 million, or 21%,6%, to $120.5$158.3 million for the three months ended DecemberJune 28, 2025,2026, from sales of $99.8$149.6 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 9%8% in the same period a year ago. Sales increased asprimarily adue result of approximately $19 million of added sales from acquired businesses as well asto improved pricing on certain of our products in our legacy businessesbusiness on slightlyhigher increasedvolumes, along with approximately $6.9 million in additional sales volumes.from acquired businesses.

Food & Health Sciences Segment. Food & Health Sciences segment sales decreasedincreased $7.7$8.1 million, or 10%,9%, to $70.0$97.3 million for the three months ended DecemberJune 28, 2025,2026, from sales of $77.7$89.2 million in the same period a year ago. Sales dollars decreased primarilyincreased as a result of decreasedincreased volumes of our food, health &agricultural, nutrition, and agriculturalpharmaceutical products, partially offset by decreased sales volumes of our food ingredients products.

Industrial Solutions Segment. Industrial Solutions segment sales increased $4.9$5.6 million, or 10%, to $53.6$60.1 million for the three months ended DecemberJune 28, 2025,2026, from sales of $48.7$54.5 million in the same period a year ago. Sales of bulk commodity products in the Industrial Solutions segment were approximately 21% of sales dollars in the current quarter and 25%22% 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 $2.4$1.6 million, or 5%,2%, to $50.8$74.0 million, or 21%23% of sales, for the three months ended DecemberJune 28, 2025,2026, from $48.4$72.4 million, or 21%25% of sales, in the same period a year ago. During the current quarter, the LIFO reserve decreased,increased, and gross profit increased,decreased, by $0.2$1.9 million. In the same period a year ago, the LIFO reserve decreased,increased, and gross profit increased,decreased, by $0.8$0.6 million. In addition to the $1.3 million impact of the LIFO reserve, gross margin was pressured by higher freight costs that were not fully recovered through freight charges billed to customers.

Water Treatment Segment. Gross profit for the Water Treatment segment increased $3.7$1.7 million, or 14%,4%, to $29.6$45.5 million, or 25%29% of sales, for the three months ended DecemberJune 28, 2025,2026, from $25.9$43.7 million, or 26%29% of sales, in the same period a year ago. GrossDuring the current quarter, the LIFO reserve increased, and gross profit increaseddecreased, by $0.5 million. In the same period a year ago, the LIFO reserve increased, and gross profit decreased, by $0.2 million. The increase in gross profit was primarily asdriven aby result of increasedhigher sales from our acquired businesses as well as increased sales in ourand legacy business.businesses, partially offset by higher LIFO and freight costs.

Food & Health Sciences Segment. Gross profit for the Food & Health Sciences segment decreasedwas $2.5$19.3 million, or 15%, to $13.8 million, or 20% of sales,million for the three months ended DecemberJune 28, 2025,2026, unchanged from $16.3the million,same orperiod 21%in the prior year. As a percentage of sales, gross profit decreased to 20% from 22% in the same period a year ago. GrossDuring the current quarter, the LIFO reserve increased, and gross profit decreaseddecreased, primarilyby as$0.8 million. In the same period a resultyear ago, the LIFO reserve increased, and gross profit decreased, by $0.2 million. The benefit of thehigher decreasesales involumes sales.was offset by higher LIFO and freight costs.

Industrial Solutions Segment. Gross profit for the Industrial Solutions segment increasedof $1.1$9.2 million, or 18%, to $7.4 million, or 14%15% of sales, for the three months ended DecemberJune 28, 2025,2026, fromwas $6.3relatively flat compared to $9.3 million, or 13%17% of sales, in the same period a year ago. GrossDuring the current quarter, the LIFO reserve increased, and gross profit increaseddecreased, asby $0.7 million. In the same period a resultyear ago, the LIFO reserve increased, and gross profit decreased, by $0.2 million. The benefit of thehigher increasesales involumes sales.was more than offset by higher LIFO and freight costs.

Selling, general and administrative (“SG&A”) expenses increased $0.9$4.3 million, or 3%,14%, to $28.3$35.3 million, or 12%11% of sales, for the three months ended DecemberJune 28, 2025,2026, from $27.4$31.0 million, or 12%11% of sales, in the same period a year ago. This included $5.4$2.1 million due to added costs from the acquired businesses in our Water Treatment segment,segment. largelyIn offsetaddition, bythe prior-year period included a year-over-year reduction of $4.6$1.9 million due to afavorable fair value adjustment recordedthat reduced SG&A, reflecting a downward revision to the estimated Water Solutions earnout liability asbased a result ofon a change in projected estimates related to the earnout target. TheThis primarybenefit componentsdid ofnot recur in the $5.4current period, resulting in a $1.9 million ofyear-over-year costsincrease relatedin toSG&A. theSG&A acquiredalso businessesincluded were personnel and operating costs, $2.3 million of intangible amortization anda $0.5 million ofincrease fairin valuenon-qualified accretiondeferred oncompensation theexpense, WaterSurpluswhich earnoutwas liability.offset by a corresponding gain within other income. These increases were partially offset by lower acquisition-related costs and other changes across our operating expenses.

Operating income increaseddecreased $1.5$2.7 million, or 7%,6%, to $22.6$38.7 million, or 9%12% of sales, for the three months ended DecemberJune 28, 2025,2026, from $21.1$41.3 million, or 9%14% of sales, in the same period a year ago due to the combined impact of the factors discussed above.

Interest expense increaseddecreased $2.2$0.5 million to $3.4$2.8 million for the three months ended DecemberJune 28, 20252026 compared to $1.2$3.3 million in the same period a year ago. Interest expense increaseddecreased dueas toa increasedresult borrowingsof $55.0 million in thenet currentdebt year,repayments primarily to fundsince the acquisitionfirst quarter of WaterSurplus.fiscal 2026.

Other income was $0.5$1.4 million for the three months ended DecemberJune 28, 20252026 andcompared 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.

Our effective income tax rate was approximately 27%24% for the three months ended DecemberJune 28, 20252026 and 26%25% for the same period a year ago. The effective tax rate in theboth prior year periodyears 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%25% to 27%.

Cash was $8.2$8.0 million at DecemberJune 28, 2025,2026, an increase of $3.1$4.1 million as compared with the $5.1$3.9 million available as of March 30,29, 2025.2026.

Cash provided by operating activities was $106.6$35.2 million for the ninethree months ended DecemberJune 28, 2025,2026, compared to cash provided by operating activities of $80.3$31.5 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 receivablesinventories and inventoriesaccounts payable compared to the same period a year ago.ago, which was mostly offset by unfavorable changes in accounts receivable. 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 used in investing activities was $204.6$14.9 million for the ninethree months ended DecemberJune 28, 2025,2026, compared to $72.8$164.5 million in the same period a year ago. In the current period, we incurred acquisition spending of $167.1$3.6 million,million compared to $151.3 million in the same period a year ago, including the acquisition of WaterSurplus for approximately $149.9 million paid at closing. Capital expenditures were $38.7$11.6 million for the current period, compared to $30.0$13.5 million in the same period a year ago. In the current period, we expended $4.2less million more foron real estate and building expansions, contributing to the overall increasedecrease in capital expenditures compared to the prior year.

Cash providedused byin financing activities was $101.1$16.1 million for the ninethree months ended DecemberJune 28, 2025,2026, compared to $6.3$142.5 million of cash usedprovided inby financing activities in the same period a year ago. Included in financing activities in the current period were no net debt borrowings of $115.0 million,borrowings, compared to net debt borrowings of $15.0$150.0 million in the same period a year ago.ago Wewhen we drew approximately $150 million of the proceeds from the Revolving Loan Facility for the acquisition of WaterSurplus. In addition, we repurchased no$7.0 million of our common stock in the current period, compared to $9.1no millionrepurchases in the same period of the prior year.

Our Board has authorized the repurchase of up to 2.6 million shares of our outstanding common shares. 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 three andmonths nineended June 28, 2026, we repurchased 45,196 shares of common stock at an aggregate purchase price of $7.0 million. During the three months ended DecemberJune 28,29, 2025, we repurchased no shares of common stock. During the three months ended December 29, 2024, we repurchased no shares of common stock and 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. As of DecemberJune 28, 2025,2026, 731,544686,348 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 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 (as amended, restated or modified from time to time, the “Credit Agreement”). A Joinder, Consent and Second Amendment, dated April 25, 2025 increased the revolving commitment under the Credit Agreement to provide us with senior secured revolving credit facilities (the “Revolving Loan Facility”) totaling $400.0 million. A Third Amendment, dated October 15, 2025, modified terms related to qualified receivables transactions, as defined in the Credit Agreement. The Revolving Loan Facility includes a $10.0 million letter of credit subfacility and $25.0 million swingline subfacility. The Revolving Loan Facility has a five-year maturity date, maturing on April 25, 2030. The Revolving Loan Facility is secured by substantially all of our personal property assets and those of our subsidiaries. We may use the amount available under the Revolving Loan Facility for working capital, capital expenditures, share repurchases, restricted payments and acquisitions permitted under the Credit Agreement, and other general corporate purposes. At June 28, 2026, we had $244.0 million outstanding under the Revolving Loan Facility.

Borrowings under the Revolving Loan Facility bear interest at a rate per annum equal to one of the following, plus, in both cases, an applicable margin based upon our leverage ratio: (a) Term SOFR, 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. S. Bank’s prime rate, (2) the Federal Funds Effective Rate plus 0.5%, or (3) one-month Term SOFR for U.S. dollars plus 1.0%. The Term SOFR margin is between 1.0% and 1.85%, depending on our leverage ratio. The base rate margin is between 0.00% and 0.85%, depending on our leverage ratio. At DecemberJune 28, 2025,2026, the effective interest rate on our borrowings was 4.8%.4.3%.

Debt issuance costs paid to the Lenders are being amortized as interest expense over the term of the Credit Agreement. As of DecemberJune 28, 2025,2026, the unamortized balance of these costs was $0.8$0.7 million, and is reflectedincluded aswithin aother reductionlong-term of debtassets on our condensed consolidated balance sheet.

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 DecemberJune 28, 20252026 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,default 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 CreditRevolving 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. We believe that our existing cash and cash equivalents, together with cash generated from operations and available borrowings under our existing Credit Agreement, will be sufficient to meet our working capital expenditure requirements for at least the next 12 months.