NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 – Summary of Significant Accounting Policies
Basis of Presentation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and, accordingly, do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements and footnotes included in our Annual Report on Form 10-K for the fiscal year ended March 29, 2026, previously filed with the Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly our financial position and the results of our operations and cash flows for the periods presented. All adjustments made to the interim condensed consolidated financial statements were of a normal recurring nature. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three months ended June 28, 2026 are not necessarily indicative of the results that may be expected for the full year. As used in this Form 10-Q, except where otherwise stated or indicated by the context, "Hawkins," "we," "us," "the Company," or "our" means Hawkins, Inc. and its subsidiaries. References to "fiscal 2024" refer to the fiscal year ended March 31, 2024, references to "fiscal 2026" refer to the fiscal year ended March 29, 2026, and references to "fiscal 2027" refer to the fiscal year ending March 28, 2027.
Use of Estimates. The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, particularly receivables, inventories, property, plant and equipment, right-of-use assets, goodwill, intangibles, deferred compensation plan assets, accrued expenses, environmental remediations, short-term and long-term lease liabilities, pension withdrawal liability, deferred compensation liability, earnout liability, income taxes and related accounts and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Accounting Policies. The accounting policies we follow are set forth in Note 1 – Nature of Business and Significant Accounting Policies to our consolidated financial statements in our Annual Report on Form 10-K for fiscal 2026, previously filed with the SEC. There have been no significant changes in our accounting policies since the end of fiscal 2026. Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") periodically issues Accounting Standards Updates ("ASUs") that amend the Financial Accounting Standards Codification ("ASC"). We evaluate the impact of the newly issued accounting guidance to determine the effect, if any, on our consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies interim reporting requirements, improves the organization of interim disclosure guidance, and introduces a disclosure principle for material events occurring since the end of the last annual reporting period. The guidance is effective for interim periods in fiscal years beginning after December 15, 2027, our fiscal 2029. We are currently evaluating the impact that the adoption of this ASU may have on our consolidated financial statements and interim disclosures in our first quarter, fiscal 2029 Form 10-Q and periodic reports thereafter.
In September 2025, the FASB issued ASU 2025-06, Intangibles, Goodwill, and Other Internal-Use Software (Subtopic 350-40): Targeted Improvements, which modernizes the recognition guidance requiring entities to begin capitalizing software costs when both of the following occur: (1) Management has authorized and committed funding to the software project and (2) It is probable that the project will be completed and the software will be used to perform the function intended. ASU 2025-06 is effective for annual periods beginning after December 15, 2027, our fiscal 2029, and interim periods within those annual reporting periods, with early adoption permitted. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statement disclosures in our first quarter, fiscal 2029 10-Q and periodic reports thereafter.
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which requires public entities to disclose, within the footnotes to the financial statements, disaggregated information about certain income statement expense captions, including disclosure of amounts for purchases of inventory, employee compensation, depreciation and intangible asset amortization, included in each relevant expense caption. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, our fiscal 2028, and interim periods within fiscal years beginning after December 15, 2027, our fiscal 2029, on a prospective basis, with early adoption and retrospective application permitted. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statement disclosures in our Form 10-K for fiscal 2028 and periodic reports thereafter.
Note 2 — Acquisitions
General
We generally pursue business combinations to strengthen our position in existing markets, increase our market share and product offerings and expand into new markets. Acquisitions are accounted for under the acquisition method of accounting. For each acquisition, the excess of the purchase consideration over the fair value of the net assets acquired and liabilities assumed is recorded as goodwill, which generally represents the combined value of our existing resources with the organizational talent of the acquired companies’ respective management teams to maximize efficiencies, market share growth and overall financial performance. For each acquisition, we complete our allocation of purchase price to the fair values of acquired assets and liabilities within a one-year measurement period.
For each acquisition completed in the first quarter of fiscal 2027 and the first quarter of fiscal 2026, the results of operations since the acquisition date and the assets are presented in our Water Treatment segment. Costs associated with each acquisition were not material and were expensed as incurred.
Fiscal 2027 Material Acquisitions
We completed one immaterial acquisition in the first quarter of fiscal 2027.
Fiscal 2026 Material Acquisitions
Acquisition of WaterSurplus, Inc.: On April 25, 2025, we acquired substantially all of the assets and assumed certain liabilities of Surplus Management, Inc. d/b/a WaterSurplus (“WaterSurplus”) for an initial purchase price of approximately $149.9 million under the terms of an asset purchase agreement by and among WaterSurplus and related entities and their shareholders, Panther Acquisition Corporation, and Hawkins, Inc., as well as a related real estate purchase agreement. In addition, we may be obligated to pay an additional earnout amount based on a target of accumulated gross profit for the first five years after the acquisition. The maximum earnout liability of $53.7 million was discounted and recorded at the estimated present value of $43.0 million at the acquisition date. The recognition of the earnout liability represented a noncash investing activity, as no cash was paid at inception. WaterSurplus is based in Rockford, IL and delivers sustainable water treatment solutions to customers throughout the United States.
The following table summarizes the purchase consideration and fair values of assets acquired and liabilities assumed as of the date of acquisition:
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| (In thousands) | | |
| Cash paid | | $ | 149,876 | |
| Present value of earnout liability | | 43,000 |
| Total purchase consideration | | $ | 192,876 | |
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| Trade accounts receivable | | $ | 3,030 | |
| Inventories | | 4,325 |
| Other current assets | | 933 |
| Property, plant, and equipment | | 12,887 |
| Intangible assets | | |
| Customer relationships | | 76,000 |
| Trade names | | 6,200 |
| Technology | | 12,000 |
| Accounts payable — trade | | (2,169) |
| Other current liabilities | | (2,934) |
| Total fair value of assets acquired and liabilities assumed | $ | 110,272 | |
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| Goodwill | | $ | 82,604 | |
The expected useful lives of the acquired intangible assets are 15 years for customer relationships, 15 years for trade names and 10 years for technology. The goodwill recognized as a result of this acquisition is expected to be deductible for tax purposes. We have completed the purchase price allocation. The results of operations since the acquisition date and the assets are included in our Water Treatment segment. Costs associated with this transaction were not material and were expensed as incurred.
Note 3 - Revenue
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 months ended June 28, 2026 and June 29, 2025:
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| Three months ended June 28, 2026 |
| (In thousands) | Water
Treatment | | Food & Health Sciences | | Industrial Solutions | | Total |
Manufactured, blended, repackaged products or equipment (1) | $ | 140,037 | | | $ | — | | | $ | 45,860 | | | $ | 185,897 | |
Bulk products (2) | 16,296 | | | — | | | 12,602 | | | 28,898 | |
| Nutrition | — | | | 37,057 | | | — | | | 37,057 | |
| Food | — | | | 24,310 | | | — | | | 24,310 | |
| Pharmaceutical | — | | | 6,965 | | | — | | | 6,965 | |
| Agricultural | — | | | 27,914 | | | — | | | 27,914 | |
| Other | 1,960 | | | 1,004 | | | 1,670 | | | 4,634 | |
| Total external customer sales | $ | 158,293 | | | $ | 97,250 | | | $ | 60,132 | | | $ | 315,675 | |
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| Three months ended June 29, 2025 |
| (In thousands) | Water
Treatment | | Food & Health Sciences | | Industrial Solutions | | Total |
Manufactured, blended, repackaged products or equipment (1) | $ | 136,347 | | | $ | — | | | $ | 41,318 | | | $ | 177,665 | |
Bulk products (2) | 11,969 | | | — | | | 11,844 | | | 23,813 | |
| Nutrition | — | | | 35,337 | | | — | | | 35,337 | |
| Food | — | | | 26,077 | | | — | | | 26,077 | |
| Pharmaceutical | — | | | 5,557 | | | — | | | 5,557 | |
| Agricultural | — | | | 21,469 | | | — | | | 21,469 | |
| Other | 1,250 | | | 737 | | | 1,367 | | | 3,354 | |
| Total external customer sales | $ | 149,566 | | | $ | 89,177 | | | $ | 54,529 | | | $ | 293,272 | |
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(1)This line includes our non-bulk specialty products in our Water Treatment and Industrial Solutions segments that we either manufacture, blend, repackage, resell in their original form, or direct ship to our customers in smaller quantities, and equipment and services we provide for our customers.
(2)This line includes bulk products in our Water Treatment and Industrial Solutions segments 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.
Note 4 – Earnings per Share
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.
Basic and diluted EPS were calculated using the following: | | | | | | | | | | | | | | | | | | |
| | | Three months ended | | |
| | June 28, 2026 | | June 29, 2025 | | | | |
| Weighted-average common shares outstanding—basic | | 20,777,481 | | | 20,717,485 | | | | | |
| Dilutive impact of performance units and restricted stock | | 76,510 | | | 93,077 | | | | | |
| Weighted-average common shares outstanding—diluted | | 20,853,991 | | | 20,810,562 | | | | | |
For each of the periods presented, there were no shares excluded from the calculation of weighted-average common shares for diluted EPS.
Note 5 – Fair Value Measurements
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). The carrying value of cash equivalents, accounts receivable, accounts payable, and accrued expenses approximates fair value because of the short-term nature of these instruments. Because of the variable-rate nature of our debt under our credit facility, the carrying value of our debt also approximates fair value.
Assets and Liabilities Measured at Fair Value on a Recurring Basis. The fair value hierarchy requires the use of observable market data when available. In instances where inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.
Our financial assets that are measured and reported at fair value for each reporting period are an interest rate swap, marketable securities held in a deferred compensation retirement plan, and the earnout liabilities recorded in conjunction with the acquisitions of Water Solutions Unlimited, Inc. ("Water Solutions") and WaterSurplus. The interest rate swap is classified as other current assets on our condensed consolidated balance sheets. Assets held in a deferred compensation retirement plan are classified as other long-term assets on our condensed consolidated balance sheets, with the portion of the deferred compensation retirement plan assets expected to be paid within twelve months classified as current assets. The Water Solutions earnout liability is classified as other current liabilities on our balance sheets. The WaterSurplus earnout liability is classified as a long-term liability on our balance sheets. The fair value of the interest rate swap is determined by the respective counterparties based on interest rate changes. Interest rate swaps are valued based on observable interest rate yield curves for similar instruments. The deferred compensation plan assets relate to contributions made to a non-qualified compensation plan on behalf of certain employees who are classified as “highly compensated employees” as determined by IRS guidelines. The assets are part of a rabbi trust and the funds are held in mutual funds. The fair value of the deferred compensation is based on the quoted market prices for the mutual funds at the end of the period.
The earnout liabilities recorded in conjunction with the acquisitions of Water Solutions and WaterSurplus are based upon achieving certain targets. The Water Solutions earnout is based on a target of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in year three of the acquisition. The earnout liability was valued based upon a risk-neutral pricing analysis within a Monte Carlo simulation framework, which is a Level 3 input. The WaterSurplus earnout liability is based on a target of accumulated gross profit for the first five years of the acquisition. The earnout liability was discounted and recorded at the present value of the anticipated maximum payout amount, which is a Level 3 input. The earnout liabilities are adjusted to fair value at each reporting date until settled. Changes in fair value are included in selling, general and administrative expenses in our condensed consolidated statements of income.
The following tables summarize the balances of assets and liabilities measured at fair value on a recurring basis as of June 28, 2026 and March 29, 2026.
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| (In thousands) | | | | June 28,
2026 | | March 29, 2026 |
| Assets | | | | | | |
| Deferred compensation plan assets | | Level 1 | | $ | 16,966 | | | $ | 14,146 | |
| Interest rate swap | | Level 2 | | $ | 1,109 | | | $ | 1,323 | |
| Liabilities | | | | | | |
| WaterSurplus earnout liability | | Level 3 | | $ | 45,433 | | | $ | 44,898 | |
| Water Solutions earnout liability | | Level 3 | | $ | 4,529 | | | $ | 4,529 | |
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The changes in the earnout liability measured at fair value using Level 3 inputs were as follows:
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Earnout liability at March 29, 2026 | | | | | | $ | 49,427 | |
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| Accretion of WaterSurplus earnout liability | | Level 3 | | | | $ | 535 | |
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Earnout liability at June 28, 2026 | | | | | | $ | 49,962 | |
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Note 6 – Inventories
Inventories at June 28, 2026 and March 29, 2026 consisted of the following: | | | | | | | | | | | | | | |
| | June 28,
2026 | | March 29,
2026 |
| (In thousands) | | |
| Inventory (FIFO basis) | | $ | 106,201 | | | $ | 102,589 | |
| LIFO reserve | | (26,337) | | | (24,390) | |
| Net inventory | | $ | 79,864 | | | $ | 78,199 | |
We use the last in, first out (“LIFO”) method of valuing the majority of our inventory, which causes the most recent product costs to be recognized in our condensed consolidated statements of income.
Note 7 – Goodwill and Other Identifiable Intangible Assets
The carrying amounts of goodwill for each of our three reportable segments were as follows:
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| (In thousands) | Water Treatment | Food & Health Sciences | Industrial Solutions | Total |
Balance as of March 29, 2026 | $ | 170,880 | | $ | 46,871 | | $ | 5,291 | | $ | 223,042 | |
| Addition, due to acquisitions | 786 | | — | | — | | 786 | |
Balance as of June 28, 2026 | $ | 171,666 | | $ | 46,871 | | $ | 5,291 | | $ | 223,828 | |
The following is a summary of our identifiable intangible assets as of June 28, 2026 and March 29, 2026: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | June 28, 2026 | | March 29, 2026 |
| (In thousands) | | Gross
Amount | | Accumulated
Amortization | | Net | | Gross
Amount | | Accumulated
Amortization | | Net |
| Finite-life intangible assets | | | | | | | | | | | | |
| Customer relationships | | $ | 285,254 | | | $ | (79,921) | | | $ | 205,333 | | | $ | 283,654 | | | $ | (75,216) | | | $ | 208,438 | |
| Trademarks and trade names | | $ | 21,622 | | | $ | (9,939) | | | $ | 11,683 | | | $ | 21,622 | | | $ | (9,486) | | | $ | 12,136 | |
| Other finite-life intangible assets | | 16,573 | | | (5,798) | | | 10,775 | | | 16,526 | | | (5,440) | | | 11,086 | |
| Total finite-life intangible assets | | 323,449 | | | (95,658) | | | 227,791 | | | 321,802 | | | (90,142) | | | 231,660 | |
| Indefinite-life intangible assets | | 1,227 | | | — | | | 1,227 | | | 1,227 | | | — | | | 1,227 | |
| Total intangible assets | | $ | 324,676 | | | $ | (95,658) | | | $ | 229,018 | | | $ | 323,029 | | | $ | (90,142) | | | $ | 232,887 | |
Note 8 – Other Current Liabilities
Other current liabilities at June 28, 2026 and March 29, 2026 consisted of the following:
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| (In thousands) | | June 28,
2026 | | March 29,
2026 |
| Short-term lease liability | | $ | 2,962 | | | $ | 3,000 | |
| Contract liability | | 1,452 | | | 1,580 | |
| Accrued real estate taxes | | 1,084 | | | 1,224 | |
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| Current portion of deferred compensation liability | | 489 | | | 1,334 | |
| Container deposits | | 1,444 | | | 1,383 | |
| Current portion of earnout liability | | 4,529 | | | 4,529 | |
| Other | | 3,123 | | | 4,069 | |
| Total | | $ | 15,083 | | | $ | 17,119 | |
Note 9 – Debt
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 (and 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 is secured by substantially all of our personal property assets and those of our subsidiaries, and is scheduled to mature on April 25, 2030.
In the first quarter of fiscal 2026, we drew approximately $150 million of additional proceeds to acquire substantially all of the assets of WaterSurplus as discussed in Note 2. We may use other proceeds from the Revolving Loan Facility for working capital, capital expenditures, share repurchases, restricted payments and other acquisitions permitted under the Credit Agreement, and other general corporate purposes.
We paid fees of approximately $1.0 million in fiscal 2026 associated with the April 2025 refinancing.
Borrowings under the Revolving Loan Facility bear interest at a variable rate based on term SOFR plus a margin. We have an interest rate swap in place to manage the risk associated with a portion of our variable-rate debt. The notional amount of the swap agreement is $60 million. At June 28, 2026, the effective interest rate on our borrowings was 4.3%.
As of June 28, 2026, we were in compliance with all required covenants.
Debt at June 28, 2026 and March 29, 2026 consisted of the following: | | | | | | | | | | | | | | | | |
| | June 28,
2026 | | March 29,
2026 | | |
| (In thousands) | | | |
| Revolving Loan Facility | | $ | 244,000 | | | $ | 244,000 | | | |
Note 10 – 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 2, 2023 are closed to examination by the Internal Revenue Service, and with few exceptions, state and local income tax jurisdictions. Our effective income tax rate was approximately 24% for the three months ended June 28, 2026 and 25% for the three months ended June 29, 2025. The effective tax rate in both years was impacted by favorable tax provision adjustments recorded. The effective tax rate is impacted by projected levels of annual taxable income, permanent items, and state taxes.
Note 11 – 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 2027 and fiscal 2026. These performance-based arrangements provide for the grant of performance-based restricted stock units under our 2019 Equity Incentive Plan (the "2019 Plan") 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 zero shares and 40,962 shares in the aggregate for fiscal 2027. 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 three months ended June 28, 2026: | | | | | | | | | | | | | | |
| | Shares | | Weighted-
Average Grant
Date Fair Value |
| Unvested at beginning of period | | 136,846 | | | $ | 95.93 | |
| Granted | | 38,224 | | | 161.83 | |
| Vested | | (70,859) | | | 76.60 | |
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| Unvested at end of period | | 104,211 | | | $ | 133.25 | |
We recorded compensation expense related to performance share units and restricted stock of $1.7 million for the three months ended June 28, 2026 and $1.8 million for the three months ended June 29, 2025. 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 retainer, our directors, other than the Chief Executive Officer, receive restricted stock for their Board services. The restricted stock awards are under our 2019 Plan and are generally expensed over a one-year vesting period, based on the market value on the date of grant. As of June 28, 2026, there were 4,396 shares of restricted stock with an average grant date fair value of $159.16 outstanding under this program. Compensation expense related to restricted stock awards to the Board was $0.2 million for both the three months ended June 28, 2026 and June 29, 2025.
During the second quarter of fiscal 2026, certain employees from the WaterSurplus acquisition received restricted stock awards under the 2019 Plan, primarily to incentivize their continued service. The restricted stock awards will be expensed over a three-year vesting period, based on the market value on the date of grant. As of June 28, 2026, there were 8,713 shares of restricted stock with an average grant date fair value of $142.10 outstanding under this program. Compensation expense related to restricted stock awards to certain WaterSurplus employees was $0.1 million for the three months ended June 28, 2026. No expense was recorded for the three months ended June 29, 2025.
Note 12 – Share Repurchase Program
Our Board has authorized the repurchase of up to 2.6 million shares of our outstanding common shares. The shares may be repurchased 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 June 28, 2026, 45,196 shares were repurchased at an aggregate purchase price of $7.0 million, and during the three months ended June 29, 2025, no shares were repurchased. As of June 28, 2026, 686,348 shares remained available to be repurchased under the share repurchase program.
Note 13 – Commitments and Contingencies
Environmental Remediation. In fiscal 2024, we recorded a liability of $7.7 million related to estimated remediation expenses associated with perchlorinated biphenyls ("PCBs") discovered in the soil at our Rosemount, Minnesota facility during an expansion project. This charge was recorded as an operating expense within cost of sales in our fiscal 2024 condensed consolidated statement of income. We acquired the property, which had prior heavy industrial use, in fiscal 2012. While the source of the PCBs is unknown, we have never brought PCBs onto the property or used PCBs on the site. The remediation liability is not discounted as management expects to incur these expenses within the next twelve months. Given the many uncertainties involved in assessing environmental matters, actual remediation expenses could differ from our estimates. While additional remediation expenses are reasonably possible to be incurred in future periods if new information or conditions are identified, we are unable to reasonably estimate the amount or range of any such additional expenses at this time. No additional expenses were incurred related to this liability during the three months ended June 28, 2026 and June 29, 2025.
Note 14 – Segment Information
We organize and manage our business by the following three segments, each of which meets the definition of reportable segments under ASC 280-10, Segment Reporting: Water Treatment, Food & Health Sciences, and Industrial Solutions. These segments are defined primarily by product and type of customer.
•Water Treatment Segment. Our Water Treatment Group specializes in providing chemicals, filtration media and systems, equipment, services and solutions for potable water, municipal and industrial wastewater, industrial process water, mainly non-residential swimming pool water and agricultural water. This group has the resources and flexibility to treat systems ranging in size from a single small well to a multi-million-gallon-per-day facility.
•Food and Health Sciences Segment. Our Food and Health Sciences Group specializes in processing and formulation solutions as well as ingredient distribution to manufacturers in the nutrition, food, pharmaceutical, and agricultural markets. This group offers a diverse product portfolio, including base chemistry, acid based reactions, minerals, vitamins and amino acids, excipients, botanicals and herbs, sweeteners and enzymes, fertilizers, and food-grade and pharmaceutical salts and ingredients.
•Industrial Solutions Segment. Our Industrial Solutions Group specializes in providing industrial chemicals, products and services to industries such as industrial manufacturing, chemical processing, electronics, energy, plating, and surface finishing. This group’s principal products are acids and alkalis. This segment receives, stores and distributes various chemicals in bulk quantities, including liquid caustic soda, sulfuric acid, hydrochloric acid, urea, phosphoric acid, aqua ammonia and potassium hydroxide. This group performs customer blending of chemicals according to customer formulas and specifications and repackages bulk industrial chemicals to sell in smaller quantities to our customers. The Industrial Solutions group relies on a specially trained sales staff that works directly with customers on their specific needs. This segment conducts its business primarily through manufacturing locations and terminal operations.
Our chief operating decision-maker (CODM), who is our President and Chief Executive Officer, regularly reviews the consolidated financial statements in their entirety and financial information at the reportable segment level. The CODM uses operating income and considers budget-to-actual variances on a quarterly basis when making decisions about the allocation of operating and capital resources to each segment. The CODM also uses segment operating income for evaluating pricing strategy, to assess the performance of each segment by comparing the results of each segment with one another, and in determining the compensation of certain employees. The CODM has ultimate responsibility for enterprise decisions and making resource allocation decisions for the Company and the segments.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies.
Product costs and expenses for each segment are based on actual costs incurred along with cost allocations of shared and centralized functions. Raw materials are transferred between segments at material cost, capitalized freight, and capitalized internal production and warehousing costs, with the offset settled in a balance sheet clearing account. Capitalized freight and capitalized internal production and warehousing costs are calculated and applied to inventory on an item level basis using per unit estimates that are based on historical costs or time and effort measures as appropriate. We do not record intersegment sales, and no operating segments have been aggregated.
In fiscal 2027 and 2026, none of our customers accounted for 10% or more of our total sales.
Summarized financial information for our reportable segments is presented and reconciled to consolidated financial information in the following tables:
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| (In thousands) | Water
Treatment | | Food & Health Sciences | | Industrial Solutions | | Total |
| Three months ended June 28, 2026: | | | | | | | |
| Sales | $ | 158,293 | | | $ | 97,250 | | | $ | 60,132 | | | $ | 315,675 | |
| Cost of sales - materials | (94,481) | | | (73,345) | | | (47,858) | | | |
| Cost of sales - operational overhead | (18,316) | | | (4,630) | | | (3,038) | | | |
| Selling, general, and administrative expenses | (23,670) | | | (8,028) | | | (3,637) | | | |
| Operating income | 21,826 | | | 11,247 | | | 5,599 | | | 38,672 | |
| Interest expense, net | | | | | | | (2,773) | |
| Other income | | | | | | | 1,425 | |
| Income tax expense | | | | | | | (9,070) | |
| Net income | | | | | | | 28,254 | |
| Identifiable assets* | 578,033 | | | 249,411 | | | 143,706 | | | 971,150 | |
| Capital expenditures | 8,006 | | | 1,697 | | | 1,902 | | | 11,605 | |
| Depreciation and amortization | 8,345 | | | 3,213 | | | 2,387 | | | 13,945 | |
| Three months ended June 29, 2025: | | | | | | | |
| Sales | $ | 149,566 | | | $ | 89,177 | | | $ | 54,529 | | | $ | 293,272 | |
| Cost of sales - materials | (89,159) | | | (65,814) | | | (42,848) | | | |
| Cost of sales - operational overhead | (16,660) | | | (4,015) | | | (2,414) | | | |
| Selling, general, and administrative expenses | (19,085) | | | (8,381) | | | (3,563) | | | |
| Operating income | 24,662 | | | 10,967 | | | 5,704 | | | 41,333 | |
| Interest expense, net | | | | | | | (3,269) | |
| Other income | | | | | | | 942 | |
| Income tax expense | | | | | | | (9,831) | |
| Net income | | | | | | | 29,175 | |
| Identifiable assets* | 569,354 | | | 249,315 | | | 132,575 | | | 951,244 | |
| Capital expenditures | 7,560 | | | 3,013 | | | 2,971 | | | 13,544 | |
| Depreciation and amortization | 6,904 | | | 3,200 | | | 2,187 | | | 12,291 | |
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*Unallocated assets not included, consisting primarily of cash and cash equivalents, prepaid expenses, and non-qualified deferred compensation plan assets of $35.1 million at June 28, 2026 and $37.0 million at June 29, 2025.