HAWKINS, INC. INDEX TO FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-7647 HAWKINS, INC. (Exact name of registrant as specified in its charter) Minnesota 41-0771293 (State or other jurisdiction of incorporation o ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 1, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-7647 HAWKINS, INC. (Exact name of registrant as specified in its charter) Minnesota 41-0771293 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Id ...

PART I. FINANCIAL INFORMATION This section presents the company's unaudited financial statements and management's discussion and analysis for the recent fiscal quarter [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income statements, shareholders' equity statements, and cash flow statements, along with detailed notes explaining significant accounting policies, revenue disaggregation, fair value measurements, inventory, debt, and segment information for the three months ended July 2, 2023, and comparable periods [Condensed Consolidated Balance Sheets](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Balance%20Sheets) Presents the company's financial position, including assets, liabilities, and equity, at specific reporting dates Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | July 2, 2023 | April 2, 2023 | | :-------------------- | :----------- | :------------ | | Total assets | $591,963 | $590,535 | | Total liabilities | $220,962 | $240,519 | | Total shareholders' equity | $371,001 | $350,016 | - Total assets increased slightly by **$1,428 thousand** (0.24%) from April 2, 2023, to July 2, 2023[6](index=6&type=chunk) - Total liabilities decreased by **$19,557 thousand** (8.13%) from April 2, 2023, to July 2, 2023[6](index=6&type=chunk) - Total shareholders' equity increased by **$20,985 thousand** (5.99%) from April 2, 2023, to July 2, 2023[6](index=6&type=chunk) [Condensed Consolidated Statements of Income](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Statements%20of%20Income) Details the company's revenues, expenses, and net income over a specific period Condensed Consolidated Statements of Income (in thousands, except per-share) | Metric (in thousands, except per-share) | Three Months Ended July 2, 2023 | Three Months Ended July 3, 2022 | Change ($) | Change (%) | | :-------------------------------------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Sales | $251,120 | $246,543 | $4,577 | 1.86% | | Gross profit | $51,991 | $46,749 | $5,242 | 11.21% | | Operating income | $32,487 | $27,864 | $4,623 | 16.59% | | Net income | $23,430 | $19,695 | $3,735 | 18.96% | | Basic earnings per share | $1.12 | $0.94 | $0.18 | 19.15% | | Diluted earnings per share | $1.12 | $0.94 | $0.18 | 19.15% | | Cash dividends declared per common share | $0.15 | $0.14 | $0.01 | 7.14% | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Item%201.%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Reports net income and other comprehensive income items, such as unrealized gains or losses Condensed Consolidated Statements of Comprehensive Income (in thousands) | Metric (in thousands) | Three Months Ended July 2, 2023 | Three Months Ended July 3, 2022 | Change ($) | Change (%) | | :-------------------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Net income | $23,430 | $19,695 | $3,735 | 18.96% | | Unrealized gain on interest rate swap | $749 | $465 | $284 | 61.08% | | Total comprehensive income | $24,179 | $20,160 | $4,019 | 19.94% | [Condensed Consolidated Statements of Shareholder's Equity](index=7&type=section&id=Item%201.%20Condensed%20Consolidated%20Statements%20of%20Shareholder's%20Equity) Outlines changes in shareholders' equity, including net income, dividends, and share repurchases - Shareholders' equity increased from **$350,016 thousand** at April 2, 2023, to **$371,001 thousand** at July 2, 2023, primarily driven by net income of **$23,430 thousand** and other comprehensive income of **$749 thousand**[11](index=11&type=chunk) - Cash dividends declared and paid were **$3,160 thousand** (**$0.15 per share**) for the three months ended July 2, 2023, compared to **$2,958 thousand** (**$0.14 per share**) for the same period in 2022[11](index=11&type=chunk) - No shares were repurchased during the three months ended July 2, 2023, while **181,657 shares** were repurchased for **$6,557 thousand** during the three months ended July 3, 2022[11](index=11&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Item%201.%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | Three Months Ended July 2, 2023 | Three Months Ended July 3, 2022 | Change ($) | | :-------------------- | :------------------------------ | :------------------------------ | :--------- | | Net cash provided by (used in) operating activities | $34,866 | $(9,395) | $44,261 | | Net cash used in investing activities | $(7,829) | $(11,527) | $3,698 | | Net cash (used in) provided by financing activities | $(27,553) | $23,421 | $(50,974) | | Net (decrease) increase in cash and cash equivalents | $(516) | $2,499 | $(3,015) | | Cash and cash equivalents, end of period | $7,050 | $5,995 | $1,055 | - The significant increase in cash provided by operating activities was primarily driven by decreased cash expended for inventory purchases and increased net income[13](index=13&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Item%201.%20Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the condensed consolidated financial statements [Note 1 – Summary of Significant Accounting Policies](index=9&type=section&id=Note%201%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) Describes the key accounting principles and methods used in preparing the financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with Form 10-Q instructions and generally accepted accounting principles[14](index=14&type=chunk) - Management's opinion is that the financial statements contain all necessary adjustments for fair presentation, with all adjustments being of a normal recurring nature[14](index=14&type=chunk) - There has been no significant change in accounting policies since the end of fiscal 2023 (April 2, 2023)[17](index=17&type=chunk) [Note 2 – Asset Sales](index=9&type=section&id=Note%202%20%E2%80%93%20Asset%20Sales) Details the sale of certain assets and the resulting gain recognized by the company - In the fourth quarter of fiscal 2023, the company sold certain assets related to its consumer bleach packaging business in the Industrial segment for **$7 million**[18](index=18&type=chunk) - A gain of **$3 million** was realized on this sale, recorded within selling, general and administrative expenses[18](index=18&type=chunk) [Note 3 – Revenue](index=10&type=section&id=Note%203%20%E2%80%93%20Revenue) Disaggregates revenue by product type and segment, highlighting year-over-year changes Revenue by Product Type and Segment (in thousands) | (In thousands) | Industrial (2023) | Water Treatment (2023) | Health and Nutrition (2023) | Total (2023) | Industrial (2022) | Water Treatment (2022) | Health and Nutrition (2022) | Total (2022) | | :------------- | :---------------- | :--------------------- | :-------------------------- | :----------- | :---------------- | :--------------------- | :-------------------------- | :----------- | | Manufactured, blended or repackaged products | $102,675 | $84,785 | $10,241 | $197,701 | $101,612 | $70,357 | $11,961 | $183,930 | | Distributed specialty products | — | — | $26,154 | $26,154 | — | — | $31,089 | $31,089 | | Bulk products | $15,210 | $7,521 | — | $22,731 | $20,455 | $6,790 | — | $27,245 | | Other | $2,988 | $1,345 | $201 | $4,534 | $2,643 | $1,343 | $293 | $4,279 | | **Total external customer sales** | **$120,873** | **$93,651** | **$36,596** | **$251,120** | **$124,710** | **$78,490** | **$43,343** | **$246,543** | - Total external customer sales increased by **$4,577 thousand** (1.86%) year-over-year[20](index=20&type=chunk) - Water Treatment segment sales increased by **$15,161 thousand** (19.32%), while Industrial segment sales decreased by **$3,837 thousand** (3.08%) and Health and Nutrition segment sales decreased by **$6,747 thousand** (15.57%)[20](index=20&type=chunk) [Note 4 – Earnings per Share](index=10&type=section&id=Note%204%20%E2%80%93%20Earnings%20per%20Share) Presents basic and diluted earnings per share for the reporting periods Earnings per Share | Metric | Three Months Ended July 2, 2023 | Three Months Ended July 3, 2022 | | :----- | :------------------------------ | :------------------------------ | | Basic EPS | $1.12 | $0.94 | | Diluted EPS | $1.12 | $0.94 | - Basic and diluted EPS increased by **$0.18** (19.15%) year-over-year[7](index=7&type=chunk) [Note 5 – Fair Value Measurements](index=11&type=section&id=Note%205%20%E2%80%93%20Fair%20Value%20Measurements) Details the fair value of financial instruments, including deferred compensation assets and interest rate swaps Fair Value Measurements (in thousands) | (In thousands) | July 2, 2023 | April 2, 2023 | | :------------- | :----------- | :------------ | | Deferred compensation plan assets | $9,454 | $7,659 | | Interest rate swap | $5,053 | $4,028 | - Deferred compensation plan assets increased by **$1,795 thousand** (23.44%) from April 2, 2023, to July 2, 2023[26](index=26&type=chunk) - Interest rate swap fair value increased by **$1,025 thousand** (25.45%) from April 2, 2023, to July 2, 2023[26](index=26&type=chunk) [Note 6 – Inventories](index=11&type=section&id=Note%206%20%E2%80%93%20Inventories) Provides a breakdown of inventory valuation methods and changes in net inventory Inventories (in thousands) | (In thousands) | July 2, 2023 | April 2, 2023 | | :------------- | :----------- | :------------ | | Inventory (FIFO basis) | $116,501 | $128,589 | | LIFO reserve | $(39,563) | $(39,812) |\n| Net inventory | $76,938 | $88,777 | - Net inventory decreased by **$11,839 thousand** (13.34%) from April 2, 2023, to July 2, 2023[27](index=27&type=chunk) - The LIFO reserve decreased by **$249 thousand**, indicating a favorable impact on gross profit in the current quarter[27](index=27&type=chunk)[53](index=53&type=chunk) [Note 7 – Goodwill and Intangible Assets](index=11&type=section&id=Note%207%20%E2%80%93%20Goodwill%20and%20Intangible%20Assets) Reports the carrying amounts of goodwill and intangible assets by segment - Goodwill remained constant at **$77.4 million** as of July 2, 2023, and April 2, 2023, with **$44.9 million** related to Health and Nutrition, **$26.0 million** to Water Treatment, and **$6.5 million** to Industrial segments[28](index=28&type=chunk) Intangible Assets (in thousands) | (In thousands) | July 2, 2023 Net | April 2, 2023 Net | | :------------- | :--------------- | :---------------- | | Total finite-life intangible assets | $70,164 | $71,833 | | Indefinite-life intangible assets | $1,227 | $1,227 | | Total intangible assets | $71,391 | $73,060 | - Net intangible assets decreased by **$1,669 thousand** (2.28%) from April 2, 2023, to July 2, 2023[28](index=28&type=chunk) [Note 8 – Debt](index=12&type=section&id=Note%208%20%E2%80%93%20Debt) Details the company's debt obligations, including revolving loans and compliance with covenants Debt (in thousands) | (In thousands) | July 2, 2023 | April 2, 2023 | | :------------- | :----------- | :------------ | | Senior secured revolving loan | $88,600 | $112,000 | | Total long-term debt | $78,353 | $101,731 | - The senior secured revolving loan balance decreased by **$23,400 thousand** (20.89%) from April 2, 2023, to July 2, 2023[29](index=29&type=chunk) - The company was in compliance with all covenants of its credit agreement as of July 2, 2023[29](index=29&type=chunk) [Note 9 – Income Taxes](index=12&type=section&id=Note%209%20%E2%80%93%20Income%20Taxes) Explains the effective income tax rate and factors influencing it - The effective income tax rate was **26%** for the three months ended July 2, 2023, an increase from **25%** for the three months ended July 3, 2022[30](index=30&type=chunk) - The effective tax rate is impacted by projected levels of annual taxable income, permanent items, and state taxes[30](index=30&type=chunk) [Note 10 – Share-Based Compensation](index=12&type=section&id=Note%2010%20%E2%80%93%20Share-Based%20Compensation) Reports compensation expense related to share-based awards and restricted stock activity - Compensation expense related to performance share units and restricted stock increased to **$0.7 million** for the three months ended July 2, 2023, from **$0.4 million** in the prior year period[32](index=32&type=chunk) Restricted Stock Activity | Restricted Stock Activity | Shares (July 2, 2023) | | :------------------------ | :-------------------- | | Unvested at beginning of period | 189,258 | | Granted | 61,819 | | Vested | (105,600) | | Unvested at end of period | 145,477 | [Note 11 – Share Repurchase Program](index=12&type=section&id=Note%2011%20%E2%80%93%20Share%20Repurchase%20Program) Provides details on share repurchases and the remaining authorization under the program - No shares were repurchased during the three months ended July 2, 2023[34](index=34&type=chunk) - During the three months ended July 3, 2022, **181,657 shares** were repurchased for an aggregate purchase price of **$6.6 million**[34](index=34&type=chunk) - As of July 2, 2023, **1,129,348 shares** remained available for repurchase under the program[34](index=34&type=chunk) [Note 12 – Segment Information](index=13&type=section&id=Note%2012%20%E2%80%93%20Segment%20Information) Presents financial performance data, including sales, gross profit, and operating income, by business segment Segment Information (in thousands) | (In thousands) | Industrial (2023) | Water Treatment (2023) | Health and Nutrition (2023) | Total (2023) | Industrial (2022) | Water Treatment (2022) | Health and Nutrition (2022) | Total (2022) | | :------------- | :---------------- | :--------------------- | :-------------------------- | :----------- | :---------------- | :--------------------- | :-------------------------- | :----------- | | Sales | $120,873 | $93,651 | $36,596 | $251,120 | $124,710 | $78,490 | $43,343 | $246,543 | | Gross profit | $19,306 | $26,408 | $6,277 | $51,991 | $20,009 | $18,953 | $7,787 | $46,749 | | Operating income | $12,731 | $17,282 | $2,474 | $32,487 | $13,624 | $10,252 | $3,988 | $27,864 | - Water Treatment segment sales increased by **19%** and operating income increased by **68.57%** year-over-year[37](index=37&type=chunk) - Health and Nutrition segment sales decreased by **15.57%** and operating income decreased by **37.96%** year-over-year[37](index=37&type=chunk) [Note 13 – Subsequent Events](index=13&type=section&id=Note%2013%20%E2%80%93%20Subsequent%20Events) Discloses significant events occurring after the balance sheet date, such as acquisitions - In July 2023, the company acquired substantially all the assets of EcoTech Enterprises, Inc. for **$3.4 million**[38](index=38&type=chunk) - EcoTech is a manufacturer and distributor of water treatment chemicals, and its operations will be included in the Water Treatment segment[38](index=38&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition for the three months ended July 2, 2023, compared to the prior year. It covers an overview of the business, recent asset sales and acquisitions, the share repurchase program, detailed results of operations by segment, liquidity and capital resources, critical accounting estimates, and forward-looking statements [Overview](index=14&type=section&id=Item%202.%20Overview) Provides a general description of the company's business and revenue streams - The company derives substantially all revenues from the sale of chemicals and specialty ingredients[40](index=40&type=chunk) - Business has expanded from bulk chemical distribution to include value-added chemicals and specialty ingredients, including manufacturing, blending, and repackaging[40](index=40&type=chunk) [Asset Sales and Business Acquisitions](index=14&type=section&id=Item%202.%20Asset%20Sales%20and%20Business%20Acquisitions) Summarizes recent divestitures and acquisitions, including their financial impact - Acquired EcoTech Enterprises, Inc. for **$3.4 million** in July 2023, expanding the Water Treatment segment[41](index=41&type=chunk) - Sold consumer bleach packaging business assets in the Industrial segment for **$7 million** in Q4 fiscal 2023, realizing a **$3 million** gain[42](index=42&type=chunk) [Share Repurchase Program](index=14&type=section&id=Item%202.%20Share%20Repurchase%20Program) Details the company's share repurchase authorization and remaining capacity - A share repurchase program for up to **2.6 million** common shares is in place[43](index=43&type=chunk) - As of July 2, 2023, **1,129,348 shares** remain available for repurchase[43](index=43&type=chunk) [Financial Results](index=14&type=section&id=Item%202.%20Financial%20Results) Discusses the company's approach to profitability measurement and inventory valuation methods - The company focuses on total profitability dollars rather than profitability as a percentage of sales due to raw material price fluctuations[44](index=44&type=chunk) - LIFO method is used for valuing the majority of inventory in Industrial and Water Treatment segments, while FIFO is used for Health and Nutrition[45](index=45&type=chunk) - Bulk commodity products, which are generally distributed without significant value-add, typically have the lowest margins and are price sensitive[46](index=46&type=chunk) [Results of Operations](index=14&type=section&id=Item%202.%20Results%20of%20Operations) Analyzes the company's financial performance, including sales, gross profit, and operating income Financial Performance as Percentage of Sales | Metric | Three Months Ended July 2, 2023 | Three Months Ended July 3, 2022 | | :----- | :------------------------------ | :------------------------------ | | Sales | 100.0 % | 100.0 % | | Gross profit | 20.7 % | 19.0 % | | Operating income | 12.9 % | 11.3 % | | Net income | 9.2 % | 8.0 % | [Three Months Ended July 2, 2023 Compared to Three Months Ended July 3, 2022](index=15&type=section&id=Item%202.%20Three%20Months%20Ended%20July%202%2C%202023%20Compared%20to%20Three%20Months%20Ended%20July%203%2C%202022) Compares the company's financial performance for the current quarter against the prior year period [Sales](index=15&type=section&id=Item%202.%20Sales) Analyzes sales performance across segments, highlighting drivers of change - Total sales increased by **$4.6 million** (2%) to **$251.1 million**, driven by increased selling prices[49](index=49&type=chunk) - Industrial segment sales decreased by **$3.8 million** (3%) due to the divestiture of the consumer bleach packaging business (**$4.7 million** lower sales) and overall lower volumes, partially offset by increased selling prices[50](index=50&type=chunk) - Water Treatment segment sales increased by **$15.2 million** (19%) to **$93.7 million**, primarily due to increased selling prices driven by higher raw material costs[51](index=51&type=chunk) - Health and Nutrition segment sales decreased by **$6.7 million** (15%) to **$36.6 million**, attributed to decreased sales volumes from softened customer demand and excess inventory[52](index=52&type=chunk) [Gross Profit](index=15&type=section&id=Item%202.%20Gross%20Profit) Examines changes in gross profit and margin, including the impact of LIFO adjustments - Gross profit increased by **$5.3 million** (11%) to **$52.0 million**, with gross margin improving from **19%** to **21%** of sales[53](index=53&type=chunk) - The LIFO reserve decreased by **$0.2 million** in the current quarter, increasing gross profit, compared to a **$3.8 million** increase in the prior year that decreased gross profit due to rising raw material prices[53](index=53&type=chunk) - Water Treatment segment gross profit increased by **$7.4 million** (39%) to **$26.4 million**, driven by improved per-unit margins[55](index=55&type=chunk) - Health and Nutrition segment gross profit decreased by **$1.5 million** (19%) to **$6.3 million** due to lower sales volumes and per-unit margins[56](index=56&type=chunk) [Selling, General and Administrative Expenses](index=16&type=section&id=Item%202.%20Selling%2C%20General%20and%20Administrative%20Expenses) Discusses changes in SG&A expenses and factors contributing to these changes - SG&A expenses increased by **$0.6 million** (3%) to **$19.5 million**[57](index=57&type=chunk) - A **$1.1 million** unfavorable year-over-year impact resulted from compensation expense related to gains on deferred compensation plan investments in the current quarter versus losses in the prior year, partially offset by expense control measures[57](index=57&type=chunk) [Operating Income](index=16&type=section&id=Item%202.%20Operating%20Income) Reviews the increase in operating income and improvement in operating margin - Operating income increased by **$4.6 million** (16%) to **$32.5 million**, with operating margin improving from **11%** to **13%** of sales[58](index=58&type=chunk) [Interest Expense, Net](index=16&type=section&id=Item%202.%20Interest%20Expense%2C%20Net) Analyzes changes in net interest expense due to borrowing rates and debt levels - Interest expense increased from **$0.9 million** to **$1.1 million**, primarily due to higher borrowing interest rates, largely offset by decreased outstanding borrowings[59](index=59&type=chunk) [Other Income (Expense)](index=16&type=section&id=Item%202.%20Other%20Income%20(Expense)) Explains the shift in other income/expense, primarily from deferred compensation investments - Other income was **$0.3 million**, a shift from other expense of **$0.8 million** in the prior year, due to gains on deferred compensation plan investments versus losses in the prior period[60](index=60&type=chunk) [Income Tax Provision](index=16&type=section&id=Item%202.%20Income%20Tax%20Provision) Discusses the effective income tax rate and its expected full-year range - The effective income tax rate increased to **26%** for the current quarter from **25%** in the prior year[61](index=61&type=chunk) - The effective tax rate for the full year is expected to be approximately **26% to 27%**[61](index=61&type=chunk) [Liquidity and Capital Resources](index=16&type=section&id=Item%202.%20Liquidity%20and%20Capital%20Resources) Assesses the company's cash position, operating cash flow, debt, and compliance with credit covenants - Cash and cash equivalents decreased by **$0.5 million** to **$7.0 million** at July 2, 2023[62](index=62&type=chunk) - Cash provided by operating activities significantly increased to **$34.9 million**, compared to **$9.4 million** used in the prior year, driven by decreased inventory purchases and increased net income[63](index=63&type=chunk) - Net debt repayments of **$23.4 million** occurred in the current quarter, contrasting with net debt proceeds of **$33.5 million** in the prior year[65](index=65&type=chunk) - The company has a **$250 million** senior secured Revolving Loan Facility maturing on April 30, 2027, and was in compliance with all covenants as of July 2, 2023[68](index=68&type=chunk)[72](index=72&type=chunk) - An interest rate swap agreement with a notional amount of **$60 million** is in place to manage variable-rate long-term debt risk[74](index=74&type=chunk) [Critical Accounting Estimates](index=17&type=section&id=Item%202.%20Critical%20Accounting%20Estimates) Confirms no material changes to critical accounting estimates since the last annual report - There were no material changes in critical accounting estimates since the filing of the Annual Report on Form 10-K for the fiscal year ended April 2, 2023[76](index=76&type=chunk) [Forward-Looking Statements](index=19&type=section&id=Item%202.%20Forward-Looking%20Statements) Highlights the nature of forward-looking statements and associated risks and uncertainties - The report contains forward-looking statements based on current expectations, estimates, and projections, subject to risks and uncertainties[77](index=77&type=chunk) - The company cautions against undue reliance on these statements and is not obligated to update them[77](index=77&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=20&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section outlines the company's exposure to market risks, primarily related to the cyclical nature of commodity chemical prices and interest rate fluctuations on its variable-rate debt. The company uses an interest rate swap to mitigate interest rate risk and aims to pass on material cost changes to customers - The company is subject to risks from the cyclical nature of commodity chemical prices and attempts to pass cost changes to customers[79](index=79&type=chunk) - An interest rate swap agreement with a notional amount of **$60 million**, terminating on May 1, 2027, is in place to manage variable-rate long-term debt risk[80](index=80&type=chunk) - A **25-basis point** change in interest rates on unhedged variable-rate debt would impact annual interest expense by approximately **$0.1 million**[80](index=80&type=chunk) [Item 4. Controls and Procedures](index=20&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures, confirming their effectiveness, and reports no material changes in internal control over financial reporting during the first quarter of fiscal 2024 [Evaluation of Disclosure Controls and Procedures](index=20&type=section&id=Item%204.%20Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Confirms the effectiveness of the company's disclosure controls and procedures as of the reporting date - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of July 2, 2023[82](index=82&type=chunk) [Changes in Internal Control](index=20&type=section&id=Item%204.%20Changes%20in%20Internal%20Control) Reports no material changes in internal control over financial reporting during the quarter - There was no material change in internal control over financial reporting during the first quarter of fiscal 2024[83](index=83&type=chunk) PART II. OTHER INFORMATION This section provides additional non-financial information, including legal matters, risk factors, and exhibits [Item 1. Legal Proceedings](index=21&type=section&id=Item%201.%20Legal%20Proceedings) This section states that there are no material pending legal proceedings against the company, beyond routine litigation incidental to its business - There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business[85](index=85&type=chunk) [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) This section confirms that there have been no material changes to the company's risk factors since the last Annual Report on Form 10-K - There have been no material changes to the company's risk factors from those disclosed in the Annual Report on Form 10-K for the fiscal year ended April 2, 2023[86](index=86&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=21&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides information on the company's share repurchase program, indicating no shares were repurchased during the three months ended July 2, 2023, and details the remaining shares available under the program - No shares were repurchased under the program during the three months ended July 2, 2023[87](index=87&type=chunk) - As of July 2, 2023, **1,129,348 shares** remained available to be repurchased under the Board-authorized program[87](index=87&type=chunk) [Item 3. Defaults Upon Senior Securities](index=21&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reporting period - None[88](index=88&type=chunk) [Item 4. Mine Safety Disclosures](index=21&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the company's operations - Not Applicable[89](index=89&type=chunk) [Item 5. Other Information](index=21&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report - None[90](index=90&type=chunk) [Item 6. Exhibits](index=22&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including certifications by the CEO and CFO, and the financial statements formatted in Inline Extensible Business Reporting Language (iXBRL) - Includes Certifications by Chief Executive Officer (31.1, 32.1) and Chief Financial Officer (31.2, 32.2) pursuant to the Exchange Act[92](index=92&type=chunk) - Financial statements from the Quarterly Report on Form 10-Q are filed in Inline Extensible Business Reporting Language (iXBRL) format (Exhibit 101)[92](index=92&type=chunk) SIGNATURES Confirms the official submission of the report by authorized company officers

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K HAWKINS, INC. (Exact Name of Registrant as Specified in its Charter) Minnesota 41-0771293 2381 Rosegate, Roseville, Minnesota 55113 (Address of Principal Executive Offices) (Zip Code) (State of Incorporation) (I.R.S. Employer Identification No.) (612) 331-6910 (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol: Name of exchange on ...

Page UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 1, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-7647 HAWKINS, INC. (Exact name of registrant as specified in its charter) Minnesota 41-0771293 (State or other jurisdiction of incorporation or organization) (I.R.S. Employ ...

Nasdaq: HWKN Investor Presentation FISCAL 2023, QUARTER 2 Published: November 2, 2022 FORWARD-LOOKING STATEMENTS The information contained in this presentation includes "forward-looking statements" which reflect management's expectations or beliefs as of the date of this presentation. Hawkins, Inc. cautions that actual future results could differ materially from the forward-looking statements in this presentation. Actual results may be affected by many important factors including risks and uncertainties ide ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the company's unaudited financial statements and management's analysis of its financial condition and operational results [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income, comprehensive income, equity, and cash flow statements, with detailed notes on accounting policies and key financial items [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and shareholders' equity at specific dates | Metric | October 2, 2022 (in thousands) | April 3, 2022 (in thousands) | | :-------------------------------- | :----------------------------- | :--------------------------- | | Total Assets | $599,283 | $567,328 | | Total Liabilities | $267,869 | $264,727 | | Total Shareholders' Equity | $331,414 | $302,601 | | Current Assets | $251,575 | $227,738 | | Current Liabilities | $90,851 | $101,466 | - **Total assets increased by $31.955 million** from April 3, 2022, to October 2, 2022, primarily driven by increases in trade accounts receivables and inventories[7](index=7&type=chunk) - **Total shareholders' equity increased by $28.813 million**, reflecting retained earnings growth and accumulated other comprehensive income[7](index=7&type=chunk) [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section outlines the company's financial performance over periods, including sales, gross profit, operating income, and net income | Metric (in thousands) | Three Months Ended Oct 2, 2022 | Three Months Ended Sep 26, 2021 | Six Months Ended Oct 2, 2022 | Six Months Ended Sep 26, 2021 | | :---------------------- | :----------------------------- | :------------------------------ | :--------------------------- | :---------------------------- | | Sales | $241,192 | $183,277 | $487,735 | $364,518 | | Gross Profit | $46,374 | $37,287 | $93,123 | $76,261 | | Operating Income | $26,536 | $19,608 | $54,400 | $41,726 | | Net Income | $18,000 | $14,133 | $37,695 | $30,761 | | Basic EPS | $0.86 | $0.67 | $1.81 | $1.46 | | Diluted EPS | $0.86 | $0.67 | $1.79 | $1.45 | | Cash Dividends per Share | $0.1400 | $0.1300 | $0.2800 | $0.2525 | - **Sales increased by 32%** for the three months and **34%** for the six months ended October 2, 2022, compared to the prior year periods, primarily due to price increases[8](index=8&type=chunk) - **Net income grew by 27.3%** for the three months and **22.5%** for the six months ended October 2, 2022, year-over-year[8](index=8&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section details the company's comprehensive income, including net income and other comprehensive income components | Metric (in thousands) | Three Months Ended Oct 2, 2022 | Three Months Ended Sep 26, 2021 | Six Months Ended Oct 2, 2022 | Six Months Ended Sep 26, 2021 | | :---------------------- | :----------------------------- | :------------------------------ | :--------------------------- | :---------------------------- | | Net Income | $18,000 | $14,133 | $37,695 | $30,761 | | Unrealized gain on interest rate swap | $1,977 | — | $2,442 | — | | Total Comprehensive Income | $19,977 | $14,133 | $40,137 | $30,761 | - **Total comprehensive income for the six months ended October 2, 2022, was $40.137 million**, an increase of **30.5%** from $30.761 million in the prior year, driven by net income growth and unrealized gains on interest rate swaps[10](index=10&type=chunk) [Condensed Consolidated Statements of Shareholder's Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholder's%20Equity) This section tracks changes in shareholders' equity, reflecting net income, dividends, and share repurchases | Metric (in thousands) | Balance April 3, 2022 | Balance October 2, 2022 | | :---------------------- | :-------------------- | :---------------------- | | Total Shareholders' Equity | $302,601 | $331,414 | | Net Income | $19,695 (Q1) / $18,000 (Q2) | | | Cash Dividends Declared and Paid | $(2,958) (Q1) / $(2,942) (Q2) | | | Shares Repurchased | $(6,557) (Q1) | | - **Shareholders' equity increased from $302.601 million** at April 3, 2022, to **$331.414 million** at October 2, 2022, primarily due to net income generation and other comprehensive income, partially offset by cash dividends and share repurchases[12](index=12&type=chunk) - The company **repurchased shares totaling $6.557 million** during the six months ended October 2, 2022[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's cash inflows and outflows from operating, investing, and financing activities | Metric (in thousands) | Six Months Ended Oct 2, 2022 | Six Months Ended Sep 26, 2021 | | :---------------------- | :----------------------------- | :------------------------------ | | Net Cash Provided by Operating Activities | $18,803 | $40,082 | | Net Cash Used in Investing Activities | $(20,372) | $(7,923) | | Net Cash Provided by (Used in) Financing Activities | $1,997 | $(28,355) | | Net Increase in Cash and Cash Equivalents | $428 | $3,804 | | Cash and Cash Equivalents, End of Period | $3,924 | $6,802 | - **Net cash provided by operating activities decreased significantly to $18.803 million** for the six months ended October 2, 2022, from $40.082 million in the prior year, mainly due to increased working capital uses for inventory and receivables[13](index=13&type=chunk)[87](index=87&type=chunk) - **Cash used in investing activities increased to $20.372 million**, primarily due to higher capital expenditures of $20.668 million, including facility expansion and equipment purchases[13](index=13&type=chunk)[89](index=89&type=chunk) - **Financing activities shifted from a net use of $28.355 million to a net provision of $1.997 million**, driven by **$15.0 million in net debt proceeds** compared to $15.0 million in net debt payments in the prior year[13](index=13&type=chunk)[90](index=90&type=chunk) [Note 1 – Summary of Significant Accounting Policies](index=9&type=section&id=Note%201%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and methods used in preparing the financial statements - The condensed consolidated financial statements are unaudited and prepared in accordance with Form 10-Q instructions, containing all normal recurring adjustments necessary for fair presentation[14](index=14&type=chunk) - Management's estimates and assumptions affect reported amounts, and actual results may differ[16](index=16&type=chunk) - There have been no significant changes in accounting policies since the fiscal year ended April 3, 2022[17](index=17&type=chunk) [Note 2 — Acquisitions](index=9&type=section&id=Note%202%20%E2%80%94%20Acquisitions) This note details recent business acquisitions and their impact on the company's segments - In fiscal 2022, Hawkins, Inc. acquired NAPCO Chemical Company, Inc. for **$19.0 million**, Water and Waste Specialties, Inc. for **$1.4 million**, and Southeast Water Systems LLC for **$1.2 million** (with potential additional $1.0 million), all integrated into the Water Treatment segment[18](index=18&type=chunk)[19](index=19&type=chunk)[20](index=20&type=chunk) - These acquisitions expanded the geographic reach and capabilities of the Water Treatment segment, with associated goodwill included in the segment's assets[18](index=18&type=chunk)[19](index=19&type=chunk)[20](index=20&type=chunk) [Note 3 - Revenue](index=10&type=section&id=Note%203%20-%20Revenue) This note disaggregates revenue by product type and operating segment, providing insights into sales performance | Revenue Stream (in thousands) | Three Months Ended Oct 2, 2022 | Three Months Ended Sep 26, 2021 | Six Months Ended Oct 2, 2022 | Six Months Ended Sep 26, 2021 | | :------------------------------ | :----------------------------- | :------------------------------ | :--------------------------- | :---------------------------- | | Manufactured, blended or repackaged products | $182,456 | $132,406 | $366,386 | $264,251 | | Distributed specialty products | $28,677 | $30,062 | $59,766 | $61,004 | | Bulk products | $25,852 | $18,905 | $53,097 | $35,301 | | Other | $4,207 | $1,904 | $8,486 | $3,962 | | **Total external customer sales** | **$241,192** | **$183,277** | **$487,735** | **$364,518** | - Manufactured, blended, or repackaged products are the largest revenue stream, showing significant growth across all segments[21](index=21&type=chunk) - Revenue is disaggregated by operating segments (Industrial, Water Treatment, Health and Nutrition) and product types, aligning with how financial performance is reviewed[21](index=21&type=chunk) [Note 4 – Earnings per Share](index=11&type=section&id=Note%204%20%E2%80%93%20Earnings%20per%20Share) This note explains the calculation of basic and diluted earnings per share, including the impact of dilutive securities | Metric | Three Months Ended Oct 2, 2022 | Three Months Ended Sep 26, 2021 | Six Months Ended Oct 2, 2022 | Six Months Ended Sep 26, 2021 | | :------------------------------------ | :----------------------------- | :------------------------------ | :--------------------------- | :---------------------------- | | Weighted-average common shares outstanding—basic | 20,814,686 | 20,986,542 | 20,861,754 | 21,010,422 | | Dilutive impact of performance units and restricted stock | 142,211 | 153,545 | 142,700 | 158,387 | | Weighted-average common shares outstanding—diluted | 20,956,897 | 21,140,087 | 21,004,454 | 21,168,809 | - Basic EPS is calculated by dividing net earnings by weighted-average common shares outstanding, while diluted EPS includes the dilutive impact of performance units and restricted stock[23](index=23&type=chunk) [Note 5 – Fair Value Measurements](index=11&type=section&id=Note%205%20%E2%80%93%20Fair%20Value%20Measurements) This note describes the fair value hierarchy and measurements for financial assets and liabilities - Financial assets and liabilities are measured at fair value using an exit price concept, with observable market data prioritized[24](index=24&type=chunk)[25](index=25&type=chunk) | Asset (in thousands) | Fair Value Hierarchy Level | October 2, 2022 | April 3, 2022 | | :--------------------- | :------------------------- | :-------------- | :------------ | | Deferred compensation plan assets | Level 1 | $7,092 | $7,038 | | Interest rate swap | Level 2 | $5,114 | $1,769 | - The fair value of the interest rate swap increased significantly from **$1.769 million to $5.114 million**, reflecting changes in interest rates[28](index=28&type=chunk) [Note 6 – Inventories](index=12&type=section&id=Note%206%20%E2%80%93%20Inventories) This note provides details on inventory valuation methods and changes in inventory balances | Inventory (in thousands) | October 2, 2022 | April 3, 2022 | | :----------------------- | :-------------- | :------------ | | Inventory (FIFO basis) | $143,433 | $116,325 | | LIFO reserve | $(30,371) | $(21,340) | | Net inventory | $113,062 | $94,985 | | FIFO value of LIFO inventories | $110,300 | $83,700 | - **Net inventory increased by $18.077 million** from April 3, 2022, to October 2, 2022, with a notable increase in the LIFO reserve due to rising raw material prices[29](index=29&type=chunk)[63](index=63&type=chunk) [Note 7 – Goodwill and Intangible Assets](index=12&type=section&id=Note%207%20%E2%80%93%20Goodwill%20and%20Intangible%20Assets) This note presents the carrying amounts of goodwill and other intangible assets, including amortization details | Asset Category (in thousands) | October 2, 2022 Net | April 3, 2022 Net | | :---------------------------- | :------------------ | :---------------- | | Goodwill | $77,401 | $77,401 | | Customer relationships | $74,092 | $77,245 | | Trademarks and trade names | $1,344 | $1,624 | | Other finite-life intangible assets | $24 | $97 | | Indefinite-life intangible assets | $1,227 | $1,227 | | **Total intangible assets** | **$76,687** | **$80,193** | - **Goodwill remained stable at $77.4 million**, with the largest portions allocated to Health and Nutrition (**$44.9 million**) and Water Treatment (**$26.0 million**) segments[30](index=30&type=chunk) - **Net intangible assets decreased from $80.193 million to $76.687 million**, primarily due to amortization of customer relationships[30](index=30&type=chunk) [Note 8 – Debt](index=12&type=section&id=Note%208%20%E2%80%93%20Debt) This note details the company's debt obligations, including revolving loans and compliance with covenants | Debt (in thousands) | October 2, 2022 | April 3, 2022 | | :-------------------- | :-------------- | :------------ | | Senior secured revolving loan | $141,000 | $126,000 | | Total debt, net of debt issuance costs | $140,601 | $125,557 | | Current portion of long-term debt | $(9,913) | $(9,913) | | Total long-term debt | $130,688 | $115,644 | - **Total debt, net of debt issuance costs, increased by $15.044 million to $140.601 million** as of October 2, 2022, primarily due to increased borrowings under the senior secured revolving loan to meet working capital needs[31](index=31&type=chunk)[90](index=90&type=chunk) - The company was in compliance with all covenants of its credit agreement as of October 2, 2022[31](index=31&type=chunk) [Note 9 – Income Taxes](index=12&type=section&id=Note%209%20%E2%80%93%20Income%20Taxes) This note outlines the effective income tax rate and factors influencing tax expense - The effective income tax rate was **26%** for the six months ended October 2, 2022, consistent with the prior year period[32](index=32&type=chunk) - The effective tax rate is influenced by projected annual taxable income, permanent items, and state taxes, with a full-year expectation of **26% to 27%**[32](index=32&type=chunk)[85](index=85&type=chunk) [Note 10 – Leases](index=13&type=section&id=Note%2010%20%E2%80%93%20Leases) This note provides information on operating lease agreements, terms, and related expenses - The company has operating lease agreements for facilities, land, vehicles, and IT equipment, with remaining terms ranging from 1 to 22 years[33](index=33&type=chunk) | Metric | October 2, 2022 | April 3, 2022 | | :-------------------------------- | :-------------- | :------------ | | Weighted average remaining lease term (years) | 8.67 | 8.91 | | Weighted average discount rate | 2.6 % | 2.6 % | | Total lease expense (six months) | $1.5 million | $1.4 million | | Lease Maturities (in thousands) | Operating Leases | | :------------------------------ | :--------------- | | Remaining fiscal 2023 | $807 | | Fiscal 2024 | $1,393 | | Fiscal 2025 | $1,330 | | Fiscal 2026 | $1,268 | | Fiscal 2027 | $1,239 | | Thereafter | $5,024 | | **Total** | **$11,061** | | Less: Interest | $(870) | | **Present value of lease liabilities** | **$10,191** | [Note 11 – Share-Based Compensation](index=14&type=section&id=Note%2011%20%E2%80%93%20Share-Based%20Compensation) This note details the company's share-based compensation plans, including restricted stock units and awards - The company grants performance-based restricted stock units to executive officers and restricted stock awards to non-employee directors[38](index=38&type=chunk)[40](index=40&type=chunk) | Metric (in thousands) | Three Months Ended Oct 2, 2022 | Three Months Ended Sep 26, 2021 | Six Months Ended Oct 2, 2022 | Six Months Ended Sep 26, 2021 | | :---------------------- | :----------------------------- | :------------------------------ | :--------------------------- | :---------------------------- | | Compensation expense (performance share units & restricted stock) | $0.8 million | $0.6 million | $1.2 million | $1.2 million | | Compensation expense (Board restricted stock awards) | $0.1 million | $0.1 million | $0.2 million | $0.2 million | | Restricted Stock Activity | Shares | Weighted Average Grant Date Fair Value | | :------------------------ | :----- | :------------------------------------- | | Unvested at beginning of period | 214,478 | $25.48 | | Granted | 88,524 | $38.31 | | Vested | (102,860) | $18.69 | | Forfeited or expired | (10,884) | $34.68 | | Unvested at end of period | 189,258 | $34.64 | [Note 12 – Share Repurchase Program](index=14&type=section&id=Note%2012%20%E2%80%93%20Share%20Repurchase%20Program) This note describes the company's share repurchase activities and the remaining authorization - On August 4, 2022, the Board increased the authorized share repurchase program from **1.6 million to 2.6 million shares**[41](index=41&type=chunk) | Period | Shares Repurchased | Aggregate Purchase Price | | :-------------------------------- | :----------------- | :----------------------- | | Six months ended Oct 2, 2022 | 181,657 | $6.6 million | | Six months ended Sep 26, 2021 | 209,963 | $7.4 million | - As of October 2, 2022, **1,129,348 shares remained available** for repurchase under the program[41](index=41&type=chunk) [Note 13 – Segment Information](index=15&type=section&id=Note%2013%20%E2%80%93%20Segment%20Information) This note disaggregates financial performance by operating segment, including sales and operating income - The company operates in three reportable segments: Industrial, Water Treatment, and Health and Nutrition, with performance evaluated based on profit or loss from operations before income taxes[43](index=43&type=chunk)[44](index=44&type=chunk) | Segment (in thousands) | Sales (3M Oct 2, 2022) | Operating Income (3M Oct 2, 2022) | Sales (6M Oct 2, 2022) | Operating Income (6M Oct 2, 2022) | | :--------------------- | :--------------------- | :-------------------------------- | :--------------------- | :-------------------------------- | | Industrial | $113,939 | $10,822 | $238,649 | $24,446 | | Water Treatment | $86,488 | $11,422 | $164,978 | $21,674 | | Health and Nutrition | $40,765 | $4,292 | $84,108 | $8,280 | | **Total** | **$241,192** | **$26,536** | **$487,735** | **$54,400** | - All segments showed increased sales and operating income for both the three and six months ended October 2, 2022, with Water Treatment showing the highest operating income for the three-month period[45](index=45&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=16&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the company's financial condition and operational results for the six months ended October 2, 2022, covering business overview, acquisitions, share repurchases, segment performance, liquidity, and critical accounting estimates [Overview](index=16&type=section&id=Overview) This section provides a general business description, revenue sources, and inventory valuation methods - Hawkins, Inc. primarily derives revenue from selling chemicals and specialty ingredients, evolving from a bulk chemical distributor to include value-added chemicals and specialty ingredients through manufacturing, blending, and repackaging[48](index=48&type=chunk) - The company focuses on total profitability dollars rather than profitability as a percentage of sales, as raw material cost fluctuations can impact sales percentages[54](index=54&type=chunk) - Inventory in Industrial and Water Treatment segments is valued using the LIFO method, while the Health and Nutrition segment uses FIFO[55](index=55&type=chunk) [Business Acquisitions](index=16&type=section&id=Business%20Acquisitions) This section details recent acquisitions and their strategic contribution to the Water Treatment segment - In fiscal 2022, Hawkins acquired NAPCO Chemical Company, Inc., Water and Waste Specialties, LLC, and Southeast Water Systems LLC, all contributing to the Water Treatment segment's geographic reach and capabilities[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - The aggregate annual revenue of these three acquired businesses totaled approximately **$17 million** prior to their respective acquisition dates[52](index=52&type=chunk) [Share Repurchase Program](index=16&type=section&id=Share%20Repurchase%20Program) This section outlines the company's share repurchase authorization and remaining capacity - The Board increased the authorized share repurchase program from **1.6 million to 2.6 million shares** on August 4, 2022[53](index=53&type=chunk) - As of October 2, 2022, **1,129,348 shares remained available** for repurchase under the program[53](index=53&type=chunk) [Financial Results](index=16&type=section&id=Financial%20Results) This section highlights the company's approach to profitability and inventory valuation methods - The company prioritizes total profitability dollars over profitability as a percentage of sales due to fluctuations in raw material costs, particularly in the Industrial and Water Treatment segments[54](index=54&type=chunk) - The LIFO method is used for valuing the majority of inventory in the Industrial and Water Treatment segments, while the FIFO method is used for the Health and Nutrition segment[55](index=55&type=chunk) [Results of Operations](index=17&type=section&id=Results%20of%20Operations) This section analyzes the company's sales, gross profit, operating income, and net income for the reported periods [Three Months Ended October 2, 2022 Compared to Three Months Ended September 26, 2021](index=17&type=section&id=Three%20Months%20Ended%20October%202%2C%202022%20Compared%20to%20Three%20Months%20Ended%20September%2026%2C%202021) This section compares the company's financial performance for the three-month periods, highlighting key revenue and profit drivers | Metric | Oct 2, 2022 | Sep 26, 2021 | Change ($) | Change (%) | | :-------------------------------- | :---------- | :----------- | :--------- | :--------- | | Sales (in thousands) | $241,192 | $183,277 | $57,915 | 31.6% | | Gross Profit (in thousands) | $46,374 | $37,287 | $9,087 | 24.4% | | Operating Income (in thousands) | $26,536 | $19,608 | $6,928 | 35.3% | | Net Income (in thousands) | $18,000 | $14,133 | $3,867 | 27.4% | | Interest Expense, Net (in thousands) | $1,383 | $329 | $1,054 | 320.4% | - **Sales increased by 32% to $241.2 million**, driven by price increases across all segments[59](index=59&type=chunk) Industrial segment sales rose **37%**, Water Treatment **39%** (including acquisitions), and Health & Nutrition **7%**[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk) - **Gross profit increased by 24% to $46.4 million**, but gross profit margin decreased from 20% to 19% due to a **$5.3 million increase in LIFO reserve** (vs. $3.0 million prior year) primarily from rising raw material prices[63](index=63&type=chunk) - **Operating income increased by 35% to $26.5 million**, while **interest expense surged by 320% to $1.4 million** due to higher borrowing rates and increased outstanding borrowings[68](index=68&type=chunk)[69](index=69&type=chunk) [Six Months Ended October 2, 2022 Compared to Six Months Ended September 26, 2021](index=18&type=section&id=Six%20Months%20Ended%20October%202%2C%202022%20Compared%20to%20Six%20Months%20Ended%20September%2026%2C%202021) This section compares the company's financial performance for the six-month periods, detailing sales, gross profit, and net income changes | Metric | Oct 2, 2022 | Sep 26, 2021 | Change ($) | Change (%) | | :-------------------------------- | :---------- | :----------- | :--------- | :--------- | | Sales (in thousands) | $487,735 | $364,518 | $123,217 | 33.8% | | Gross Profit (in thousands) | $93,123 | $76,261 | $16,862 | 22.1% | | Operating Income (in thousands) | $54,400 | $41,726 | $12,674 | 30.4% | | Net Income (in thousands) | $37,695 | $30,761 | $6,934 | 22.5% | | Interest Expense, Net (in thousands) | $2,312 | $678 | $1,634 | 241.0% | - **Sales increased by 34% to $487.7 million**, driven by increased selling prices and demand[72](index=72&type=chunk) Industrial segment sales grew **41%**, Water Treatment **39%** (including acquisitions), and Health & Nutrition **9%**[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) - **Gross profit increased by 22% to $93.1 million**, but gross profit margin decreased from 21% to 19% due to a **$9.0 million increase in LIFO reserve** (vs. $4.8 million prior year) from rising raw material costs[76](index=76&type=chunk)[77](index=77&type=chunk) - **Operating income increased by 30% to $54.4 million**, while **interest expense rose by 241% to $2.3 million** due to higher borrowing rates and increased working capital needs[82](index=82&type=chunk)[83](index=83&type=chunk) [Liquidity and Capital Resources](index=19&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's cash position, operating, investing, and financing cash flows, and available credit facilities - **Cash and cash equivalents increased by $0.4 million to $3.9 million** as of October 2, 2022[86](index=86&type=chunk) - **Net cash provided by operating activities decreased to $18.8 million** (from $40.1 million prior year) due to increased working capital uses for inventory and customer receivables[87](index=87&type=chunk) - **Net cash used in investing activities increased to $20.4 million** (from $7.9 million prior year), primarily due to higher capital expenditures of **$20.7 million**[89](index=89&type=chunk) - **Net cash provided by financing activities was $2.0 million** (compared to $28.4 million used prior year), driven by **$15.0 million in net debt proceeds** to fund working capital needs[90](index=90&type=chunk) - The company has a **$250 million senior secured revolving credit facility**, with **$141.0 million outstanding** as of October 2, 2022, and was in compliance with all covenants[31](index=31&type=chunk)[93](index=93&type=chunk)[98](index=98&type=chunk) - The share repurchase program had **1,129,348 shares remaining available** as of October 2, 2022[92](index=92&type=chunk) [Critical Accounting Estimates](index=21&type=section&id=Critical%20Accounting%20Estimates) This section confirms no material changes to critical accounting estimates since the last annual report - There were no material changes in critical accounting estimates since the filing of the Annual Report on Form 10-K for the fiscal year ended April 3, 2022[102](index=102&type=chunk) [Forward-Looking Statements](index=21&type=section&id=Forward-Looking%20Statements) This section cautions that forward-looking statements are subject to risks and uncertainties and are not guaranteed to be updated - The report contains forward-looking statements based on current expectations, estimates, and projections, which are subject to risks and uncertainties that could cause actual results to differ materially[103](index=103&type=chunk) - The company is not obligated to update these statements to reflect future events or circumstances[103](index=103&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=22&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses the company's exposure to market risks, primarily related to commodity chemical prices and interest rates, and its strategies for managing these risks - The company is subject to the cyclical nature of commodity chemical prices but does not use forward contracts or hedging for purchases, instead attempting to pass cost changes to customers[105](index=105&type=chunk) - Interest rate risk is managed through an interest rate swap agreement with a notional amount of **$60 million**, terminating on May 1, 2027, to hedge a portion of variable-rate long-term debt[106](index=106&type=chunk) - A **25-basis point change** in interest rates on unhedged variable-rate debt would impact annual interest expense by approximately **$0.2 million**[106](index=106&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=22&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section details the evaluation of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=22&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as assessed by management - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of October 2, 2022[108](index=108&type=chunk) [Changes in Internal Control](index=22&type=section&id=Changes%20in%20Internal%20Control) This section reports on the absence of material changes in internal control over financial reporting during the period - There were no material changes in internal control over financial reporting during the second quarter of fiscal 2023[109](index=109&type=chunk) [PART II. OTHER INFORMATION](index=23&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section includes legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=23&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section confirms the absence of any material pending legal proceedings against the company - There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business[112](index=112&type=chunk) [ITEM 1A. RISK FACTORS](index=23&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section states that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - There have been no material changes to the risk factors from those disclosed in the Annual Report on Form 10-K for the fiscal year ended April 3, 2022[113](index=113&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=23&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section provides information regarding the company's share repurchase activities during the three months ended October 2, 2022 - No shares were repurchased during the three months ended October 2, 2022[114](index=114&type=chunk) - As of October 2, 2022, **1,129,348 shares remained available** for repurchase under the Board-authorized program[114](index=114&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=23&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section confirms that there were no defaults upon senior securities - There were no defaults upon senior securities[115](index=115&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=23&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section indicates that mine safety disclosures are not applicable to the company's operations - Mine Safety Disclosures are not applicable[116](index=116&type=chunk) [ITEM 5. OTHER INFORMATION](index=23&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section states that there is no other information to report - No other information is reported in this section[117](index=117&type=chunk) [ITEM 6. EXHIBITS](index=24&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed as part of the Form 10-Q, including certifications and financial statements in iXBRL format - Exhibits include certifications by the Chief Executive Officer and Chief Financial Officer (31.1, 31.2, 32.1, 32.2) and financial statements in Inline Extensible Business Reporting Language (iXBRL) format (101, 104)[119](index=119&type=chunk)

Nasdaq: HWKN Investor Presentation FISCAL 2023, QUARTER 1 Published: August 8, 2022 FORWARD-LOOKING STATEMENTS The information contained in this presentation includes "forward-looking statements" which reflect management's expectations or beliefs as of the date of this presentation. Hawkins, Inc. cautions that actual future results could differ materially from the forward-looking statements in this presentation. Actual results may be affected by many important factors including risks and uncertainties ident ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 3, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-7647 HAWKINS, INC. (Exact name of registrant as specified in its charter) Minnesota 41-0771293 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Ident ...

PART I [ITEM 1. Business](index=5&type=section&id=Item%201.%20Business) Hawkins, Inc. operates in Industrial, Water Treatment, and Health and Nutrition segments, providing specialty chemicals and ingredients with a focus on quality and value - Hawkins, Inc. operates in **three segments**: Industrial, Water Treatment, and Health and Nutrition, providing specialty chemicals and ingredients[16](index=16&type=chunk)[174](index=174&type=chunk) - The Industrial Group specializes in chemicals for agriculture, chemical processing, electronics, energy, food, pharmaceutical, and plating industries, with principal products including acids, alkalis, and food/pharmaceutical salts[17](index=17&type=chunk) - The Water Treatment Group offers chemicals, products, equipment, and services for potable water, municipal and industrial wastewater, and agricultural water[19](index=19&type=chunk)[174](index=174&type=chunk) - The Health and Nutrition Group provides ingredient distribution, processing, and formulation solutions for nutraceutical, functional food and beverage, personal care, and dietary supplement manufacturers[22](index=22&type=chunk)[174](index=174&type=chunk) - The company sources raw materials from numerous domestic and international suppliers and relies on distributorship agreements or supply contracts[24](index=24&type=chunk) - No single customer accounted for **10% or more of total sales** in fiscal 2022, indicating diversified customer concentration[26](index=26&type=chunk) - The company operates in a competitive industry, competing on product quality, customer service, competitive pricing, and value-added services[27](index=27&type=chunk)[40](index=40&type=chunk) - The company is subject to extensive federal, state, and local environmental, health, safety, and product-related regulations, including DOT and FDA GMPs[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) - As of April 3, 2022, Hawkins had **813 employees**, with **807 full-time**; approximately **38%** were female or racially/ethnically diverse, and **10%** were covered by collective bargaining agreements[37](index=37&type=chunk) [ITEM 1A. Risk Factors](index=8&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from intense competition, product liability, raw material price volatility, supply chain disruptions, and regulatory compliance - The company operates in a **highly competitive industry**, facing significant competition and price pressure from larger competitors with greater financial resources[40](index=40&type=chunk) - Product liability claims, recalls, and adverse publicity, especially for chemical, food, pharmaceutical, and dietary supplement products, could **significantly impact financial condition and reputation**[41](index=41&type=chunk)[45](index=45&type=chunk) - Fluctuations in raw material prices and availability, which can be cyclical and rapid, could **materially affect operations and profit margins**, as the company does not use derivatives to hedge these risks[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) - Supply chain disruptions, including transportation network issues, driver shortages, and port congestion, have **negatively impacted and could continue to impact production and financial results**[56](index=56&type=chunk)[57](index=57&type=chunk)[58](index=58&type=chunk) - The business is subject to hazards common to chemical operations (e.g., explosions, spills, natural disasters) which could **interrupt production, cause property damage, and lead to environmental contamination**[51](index=51&type=chunk)[52](index=52&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk) - Compliance with environmental, health, safety, transportation, and product-specific regulations incurs **substantial costs** and exposes the company to potential liabilities, fines, and operational restrictions[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) - Failure to comply with financial covenants under the **$250.0 million revolving credit facility** could result in default and materially adverse effects[74](index=74&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) - Impairment to the carrying value of goodwill or other intangible assets, which are tested annually, could **adversely affect financial condition and consolidated results of operations**[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) [ITEM 1B. Unresolved Staff Comments](index=17&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments from the SEC - No unresolved staff comments were reported[80](index=80&type=chunk) [ITEM 2. Properties](index=18&type=section&id=Item%202.%20Properties) Hawkins, Inc. owns and leases various facilities across its segments, including corporate headquarters, manufacturing plants, and numerous warehouses - The company's facilities include a **50,000 sq ft corporate headquarters** in Roseville, MN[82](index=82&type=chunk) - Health and Nutrition segment operates facilities in Fullerton, CA (leased, **55,800 sq ft**) and Florida, NY (owned **79,000 sq ft manufacturing**, leased **28,000 sq ft warehouse**)[82](index=82&type=chunk)[84](index=84&type=chunk) - Industrial segment has significant manufacturing and terminal operations in Minneapolis, MN (**177,000 sq ft**), Centralia, IL (**77,000 sq ft**), Dupo, IL (**64,000 sq ft**, leased land), St. Paul, MN (**32,000 sq ft**, leased land), and Rosemount, MN (**105,000 sq ft** across two adjacent facilities)[82](index=82&type=chunk)[84](index=84&type=chunk) - Water Treatment group operates out of **37 warehouses**, with **33 additional owned warehouse locations** beyond those listed in the table[21](index=21&type=chunk)[81](index=81&type=chunk) - Several key facilities, including terminals in St. Paul, MN, and a manufacturing facility in Dupo, IL, are on leased land with expiration dates ranging from **2023 to 2044**[65](index=65&type=chunk)[84](index=84&type=chunk) [ITEM 3. Legal Proceedings](index=18&type=section&id=Item%203.%20Legal%20Proceedings) Hawkins, Inc. is not currently involved in any material legal proceedings beyond routine litigation incidental to its business operations - No material pending legal proceedings were reported, other than ordinary routine litigation incidental to the business[83](index=83&type=chunk)[277](index=277&type=chunk) [ITEM 4. Mine Safety Disclosures](index=18&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine Safety Disclosures are not applicable to Hawkins, Inc.'s operations - Mine Safety Disclosures are not applicable[84](index=84&type=chunk) PART II [ITEM 5. Market for the Company's Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities](index=19&type=section&id=Item%205.%20Market%20for%20the%20Company%27s%20Common%20Equity%2C%20Related%20Shareholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Hawkins, Inc.'s common shares are listed on Nasdaq under "HWKN", with approximately **387 shareholders of record** as of May 13, 2022 - Common shares are listed on the Nasdaq Global Select Market under the symbol **"HWKN"**[3](index=3&type=chunk) - As of May 13, 2022, there were approximately **387 shareholders of record**[86](index=86&type=chunk) - The aggregate market value of voting stock held by non-affiliates on September 26, 2021, was approximately **$706.8 million**[4](index=4&type=chunk) - As of May 13, 2022, the Registrant had **21,078,132 shares of common shares outstanding**[5](index=5&type=chunk) [ITEM 6. Reserved](index=14&type=section&id=Item%206.%20Reserved) This item is reserved and contains no information - No unresolved staff comments were reported[80](index=80&type=chunk) [ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Hawkins, Inc.'s financial condition and results for fiscal 2022 and 2021, highlighting sales growth, acquisition strategy, and liquidity - The company focuses on **total profitability dollars** rather than profitability as a percentage of sales, due to fluctuations in raw material prices[92](index=92&type=chunk) - The majority of inventory (**73%**) in Industrial and Water Treatment segments is valued using the LIFO method, while Health and Nutrition uses FIFO[93](index=93&type=chunk)[190](index=190&type=chunk) - The company completed **three Water Treatment segment acquisitions** in fiscal 2022 (NAPCO Chemical Company, Water and Waste Specialties, Southeast Water Systems) with aggregate annual revenue of approximately **$17 million**[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[101](index=101&type=chunk) - In fiscal 2021, the company acquired C&L Aqua Professionals, Inc. and American Development Corporation of Tennessee, Inc. (ADC), and a manufacturing facility in Rosemount, MN, totaling approximately **$25 million in aggregate annual revenue** from the acquired businesses[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) - On March 1, 2021, a **two-for-one common stock split** was effected, adjusting par value to **$0.01 per share** and increasing authorized shares from **30 million to 60 million**[102](index=102&type=chunk) - All manufacturing facilities qualified as essential operations during the COVID-19 pandemic, maintaining output levels and focusing on employee/customer safety[104](index=104&type=chunk)[105](index=105&type=chunk) [Fiscal 2022 Compared to Fiscal 2021](index=23&type=section&id=Fiscal%202022%20Compared%20to%20Fiscal%202021) In fiscal 2022, Hawkins, Inc. experienced substantial growth, with sales increasing by **30% to $774.5 million** driven by higher selling prices and demand Fiscal 2022 vs. Fiscal 2021 Financial Highlights | Metric | Fiscal 2022 (Millions) | Fiscal 2021 (Millions) | Change (Millions) | % Change | % of Sales (FY22) | % of Sales (FY21) | | :---------------------------------- | :--------------------- | :--------------------- | :---------------- | :------- | :---------------- | :---------------- | | Sales | $774.5 | $596.9 | $177.6 | 30% | 100.0% | 100.0% | | Cost of Sales | $(628.0) | $(473.1) | $(154.9) | 33% | (81.1)% | (79.3)% | | Gross Profit | $146.5 | $123.8 | $22.7 | 18% | 18.9% | 20.7% | | SG&A Expenses | $(75.3) | $(67.9) | $(7.4) | 11% | (9.7)% | (11.3)% | | Operating Income | $71.2 | $55.9 | $15.3 | 27% | 9.2% | 9.4% | | Interest Expense, Net | $(1.4) | $(1.5) | $0.1 | -7% | (0.2)% | (0.2)% | | Income Before Income Taxes | $70.0 | $55.9 | $14.1 | 25% | 9.0% | 9.4% | | Income Tax Provision | $(18.4) | $(14.9) | $(3.5) | 23% | (2.3)% | (2.5)% | | Net Income | $51.5 | $41.0 | $10.5 | 26% | 6.7% | 6.9% | - The **53rd week** in fiscal 2022 contributed approximately **$17.5 million in additional sales**, **$3.6 million in gross profit**, **$1.0 million in SG&A expense**, and **$3 million in operating income**[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk) - Industrial segment sales increased by **42% to $386.9 million**, driven by increased selling prices due to higher raw material costs and increased sales of bulk and manufactured products[108](index=108&type=chunk) - Water Treatment segment sales increased by **34% to $228.1 million**, due to increased demand and sales from acquisitions[109](index=109&type=chunk) - Health and Nutrition segment sales increased by **4% to $159.5 million**, primarily from specialty distributed products, partially offset by normalizing demand for manufactured products post-COVID-19 surge[110](index=110&type=chunk) - Gross profit as a percentage of sales **decreased from 20.7% in fiscal 2021 to 18.9% in fiscal 2022**, largely due to a **$15.8 million increase in the LIFO reserve** from rising input costs[106](index=106&type=chunk)[111](index=111&type=chunk) - SG&A expenses increased by **$7.4 million** but **decreased as a percentage of sales from 11.3% to 9.7%**, reflecting added costs from acquisitions, increased variable incentive compensation, new personnel, and normalization of travel expenses[106](index=106&type=chunk)[115](index=115&type=chunk) - The effective tax rate remained **consistent at approximately 26.5%** for both fiscal 2022 and fiscal 2021[117](index=117&type=chunk) [Selected Quarterly Financial Data](index=25&type=section&id=Selected%20Quarterly%20Financial%20Data) Selected quarterly financial data for fiscal years 2022, 2021, and 2020 shows consistent growth in sales, gross profit, operating income, and net income, with an upward trend in EPS Selected Quarterly Financial Data (Fiscal 2022) | (In thousands, except per share data) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Total | | :---------------------------------- | :------------ | :------------- | :------------ | :------------- | :---- | | Sales | $181,241 | $183,277 | $187,050 | $222,973 | $774,541 | | Gross profit | $38,974 | $37,287 | $33,940 | $36,319 | $146,520 | | Selling, general, and administrative expenses | $16,856 | $17,679 | $19,681 | $21,110 | $75,326 | | Operating income | $22,118 | $19,608 | $14,259 | $15,209 | $71,194 | | Net income | $16,628 | $14,133 | $10,204 | $10,577 | $51,542 | | Basic earnings per share | $0.79 | $0.67 | $0.49 | $0.51 | $2.46 | | Diluted earnings per share | $0.79 | $0.67 | $0.48 | $0.50 | $2.44 | Selected Quarterly Financial Data (Fiscal 2021) | (In thousands, except per share data) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Total | | :---------------------------------- | :------------ | :------------- | :------------ | :------------- | :---- | | Sales | $143,172 | $147,801 | $142,927 | $162,971 | $596,871 | | Gross profit | $30,976 | $32,797 | $28,239 | $31,750 | $123,762 | | Selling, general, and administrative expenses | $15,038 | $16,221 | $17,750 | $18,875 | $67,884 | | Operating income | $15,938 | $16,576 | $10,489 | $12,875 | $55,878 | | Net income | $11,788 | $12,190 | $7,921 | $9,081 | $40,980 | | Basic earnings per share | $0.56 | $0.58 | $0.38 | $0.43 | $1.95 | | Diluted earnings per share | $0.55 | $0.57 | $0.37 | $0.43 | $1.93 | Selected Quarterly Financial Data (Fiscal 2020) | (In thousands, except per share data) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Total | | :---------------------------------- | :------------ | :------------- | :------------ | :------------- | :---- | | Sales | $147,336 | $140,043 | $120,406 | $132,413 | $540,198 | | Gross profit | $28,797 | $27,994 | $21,478 | $22,648 | $100,917 | | Selling, general, and administrative expenses | $14,836 | $14,817 | $14,702 | $14,891 | $59,246 | | Operating income | $13,961 | $13,177 | $6,776 | $7,757 | $41,671 | | Net income | $9,807 | $9,250 | $4,547 | $4,763 | $28,367 | | Basic earnings per share | $0.46 | $0.44 | $0.22 | $0.23 | $1.34 | | Diluted earnings per share | $0.46 | $0.43 | $0.21 | $0.22 | $1.33 | [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) Hawkins, Inc.'s operating cash flow slightly decreased in fiscal 2022, while investing activities decreased, and the company refinanced its credit facility to enhance liquidity Cash Flow Summary (In millions) | Cash Flow Activity | Fiscal 2022 | Fiscal 2021 | Fiscal 2020 | | :-------------------------------- | :---------- | :---------- | :---------- | | Net cash provided by operating activities | $42.8 | $43.8 | $58.9 | | Net cash used in investing activities | $(49.8) | $(71.4) | $(24.2) | | Net cash provided by (used in) financing activities | $7.4 | $26.4 | $(39.6) | | Net increase (decrease) in cash and cash equivalents | $0.5 | $(1.3) | $(4.9) | | Cash and cash equivalents - end of year | $3.5 | $3.0 | $4.3 | - Capital expenditures were **$28.5 million in fiscal 2022**, up from **$20.8 million in fiscal 2021**, including investments in vehicles, facility improvements, and pharmaceutical ingredient manufacturing[121](index=121&type=chunk) - Water Treatment group acquisitions totaled **$21.5 million in fiscal 2022**, a decrease from **$51.0 million in fiscal 2021**[121](index=121&type=chunk) - Cash dividends paid were **$11.1 million in fiscal 2022**, and **$8.5 million** was used for share repurchases[122](index=122&type=chunk) - On March 31, 2022, the company entered into a new credit agreement, establishing a **$250 million senior secured revolving credit facility** maturing on April 30, 2027[125](index=125&type=chunk)[255](index=255&type=chunk) - As of April 3, 2022, **$126.0 million was outstanding** under the Revolving Loan Facility, with an effective interest rate of **1.2%**[126](index=126&type=chunk)[127](index=127&type=chunk)[257](index=257&type=chunk) - The Credit Agreement requires maintaining a minimum fixed charge coverage ratio of **1.15 to 1.00** and a maximum total cash flow leverage ratio of **3.0 to 1.0**[131](index=131&type=chunk)[259](index=259&type=chunk) - The company has an interest rate swap agreement with a notional amount of **$60 million**, terminating May 1, 2027, to manage variable-rate debt risk[133](index=133&type=chunk)[235](index=235&type=chunk) [Contractual Obligations and Commercial Commitments](index=28&type=section&id=Contractual%20Obligations%20and%20Commercial%20Commitments) The company's contractual obligations primarily consist of senior secured revolver debt, interest payments, operating lease obligations, and a pension withdrawal liability Contractual Payment Obligations (In thousands) | Contractual Obligation | 2023 | 2024 | 2025 | 2026 | 2027 | More than 5 Years | Total | | :----------------------- | :--- | :--- | :--- | :--- | :--- | :---------------- | :---- | | Senior secured revolver | $— | $— | $— | $— | $— | $126,000 | $126,000 | | Interest payments | $1,833 | $1,833 | $1,833 | $1,833 | $1,833 | $152 | $9,317 | | Operating lease obligations | $1,889 | $1,515 | $1,450 | $1,388 | $1,359 | $5,171 | $12,772 | | Pension withdrawal liability | $467 | $467 | $467 | $467 | $467 | $3,037 | $5,372 | - The senior secured revolver balance of **$126 million** is assumed to remain outstanding until its April 30, 2027 maturity, though the company intends to pay down debt with excess cash flow[125](index=125&type=chunk)[135](index=135&type=chunk) - Pension withdrawal liability payments will continue through **2034**[136](index=136&type=chunk) [Critical Accounting Estimates](index=28&type=section&id=Critical%20Accounting%20Estimates) Hawkins, Inc. has determined that it has no critical accounting estimates material to its consolidated financial position, results of operations, or cash flow - The company has **no critical accounting estimates** material to its consolidated financial position, results of operations, or cash flow[137](index=137&type=chunk) [ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk](index=30&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Hawkins, Inc. is exposed to market risks from commodity chemical prices and interest rate fluctuations, managing the latter with an interest rate swap - The company is subject to market risk from the cyclical nature of commodity chemical prices but **does not engage in forward contracts or hedging** for these purchases[138](index=138&type=chunk) - Interest rate risk is limited to borrowings under the credit facility, with a **25-basis point change** on the unhedged variable-rate debt potentially impacting annual interest expense by approximately **$0.3 million**[139](index=139&type=chunk) - Other market risks, such as foreign currency risk, are **not significant** in the normal course of business[139](index=139&type=chunk) [ITEM 8. Financial Statements and Supplementary Data](index=31&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for fiscal years 2022, 2021, and 2020, along with independent auditor reports confirming internal control effectiveness - Grant Thornton LLP issued an **unqualified opinion** on the effectiveness of internal control over financial reporting as of April 3, 2022, based on COSO criteria[144](index=144&type=chunk) - Grant Thornton LLP also expressed an **unqualified opinion** on the consolidated financial statements for the years ended April 3, 2022, and March 28, 2021[145](index=145&type=chunk)[153](index=153&type=chunk) - KPMG LLP issued an **unqualified opinion** on the consolidated financial statements for the year ended March 29, 2020[161](index=161&type=chunk) - No critical audit matters were identified by Grant Thornton LLP for the current period audit[157](index=157&type=chunk) [Consolidated Balance Sheets](index=35&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show an increase in total assets to **$567.3 million** and total liabilities to **$264.7 million** in fiscal 2022, with shareholders' equity growing to **$302.6 million** Consolidated Balance Sheet Summary (In thousands) | Asset/Liability/Equity | April 3, 2022 | March 28, 2021 | | :-------------------------------- | :------------ | :------------- | | **ASSETS:** | | | | Cash and cash equivalents | $3,496 | $2,998 | | Trade accounts receivables, net | $122,826 | $90,603 | | Inventories | $94,985 | $63,864 | | Total current assets | $227,738 | $163,007 | | Net property, plant, and equipment | $161,846 | $144,612 | | Goodwill | $77,401 | $70,720 | | Intangible assets, net | $80,193 | $76,368 | | Total assets | $567,328 | $472,550 | | **LIABILITIES:** | | | | Accounts payable — trade | $66,693 | $37,313 | | Total current liabilities | $101,466 | $70,462 | | Long-term debt, less current portion | $115,644 | $88,845 | | Total liabilities | $264,727 | $207,304 | | **SHAREHOLDERS' EQUITY:** | | | | Total shareholders' equity | $302,601 | $265,246 | - Trade accounts receivables, net, increased by **$32.2 million (35.6%)** from **$90.6 million in fiscal 2021 to $122.8 million in fiscal 2022**[165](index=165&type=chunk) - Inventories increased by **$31.1 million (48.7%)** from **$63.9 million in fiscal 2021 to $95.0 million in fiscal 2022**[165](index=165&type=chunk) - Accounts payable — trade increased by **$29.4 million (78.5%)** from **$37.3 million in fiscal 2021 to $66.7 million in fiscal 2022**[165](index=165&type=chunk) - Long-term debt, less current portion, increased by **$26.8 million (30.2%)** from **$88.8 million in fiscal 2021 to $115.6 million in fiscal 2022**[165](index=165&type=chunk) [Consolidated Statements of Income](index=37&type=section&id=Consolidated%20Statements%20of%20Income) The consolidated statements of income show strong performance, with sales increasing to **$774.5 million** and net income to **$51.5 million** in fiscal 2022, driving EPS growth Consolidated Statements of Income (In thousands, except per share data) | Metric | Fiscal 2022 | Fiscal 2021 | Fiscal 2020 | | :---------------------------------- | :---------- | :---------- | :---------- | | Sales | $774,541 | $596,871 | $540,198 | | Cost of sales | $(628,021) | $(473,109) | $(439,281) | | Gross profit | $146,520 | $123,762 | $100,917 | | Selling, general and administrative expenses | $(75,326) | $(67,884) | $(59,246) | | Operating income | $71,194 | $55,878 | $41,671 | | Interest expense, net | $(1,404) | $(1,467) | $(2,511) | | Other income (expense) | $189 | $1,440 | $(204) | | Income before income taxes | $69,979 | $55,851 | $38,956 | | Income tax expense | $(18,437) | $(14,871) | $(10,589) | | Net income | $51,542 | $40,980 | $28,367 | | Basic earnings per share | $2.46 | $1.95 | $1.34 | | Diluted earnings per share | $2.44 | $1.93 | $1.33 | | Cash dividends declared per common share | $0.52250 | $0.47125 | $0.46125 | - Sales increased by **$177.7 million (30%)** from fiscal 2021 to fiscal 2022[167](index=167&type=chunk) - Net income increased by **$10.6 million (25.9%)** from fiscal 2021 to fiscal 2022[167](index=167&type=chunk) - Basic EPS increased by **$0.51 (26.2%)** and Diluted EPS increased by **$0.51 (26.4%)** from fiscal 2021 to fiscal 2022[167](index=167&type=chunk) [Consolidated Statements of Comprehensive Income](index=38&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income for Hawkins, Inc. increased to **$52.8 million** in fiscal 2022, driven by higher net income and a significant unrealized gain on interest rate swaps Consolidated Statements of Comprehensive Income (In thousands) | Metric | Fiscal 2022 | Fiscal 2021 | Fiscal 2020 | | :-------------------------------- | :---------- | :---------- | :---------- | | Net income | $51,542 | $40,980 | $28,367 | | Unrealized gain (loss) on interest rate swap | $1,291 | $79 | $(396) | | Total comprehensive income | $52,833 | $41,059 | $27,971 | - Unrealized gain on interest rate swap, net of tax, was **$1.3 million in fiscal 2022**, compared to **$0.1 million in fiscal 2021**[169](index=169&type=chunk)[237](index=237&type=chunk) [Consolidated Statements of Shareholders' Equity](index=39&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) Shareholders' equity increased to **$302.6 million** in fiscal 2022, primarily due to net income and share-based compensation, partially offset by dividends and repurchases Consolidated Statements of Shareholders' Equity (In thousands) | Metric | March 28, 2021 Balance | Fiscal 2022 Activity | April 3, 2022 Balance | | :-------------------------------- | :--------------------- | :------------------- | :-------------------- | | Common Shares (Amount) | $210 | $(1) | $209 | | Additional Paid-in Capital | $51,138 | $(4,421) | $46,717 | | Retained Earnings | $213,898 | $40,486 | $254,384 | | Accumulated Other Comprehensive Income (Loss) | $— | $1,291 | $1,291 | | Total Shareholders' Equity | $265,246 | $37,355 | $302,601 | - Net income contributed **$51.5 million** to retained earnings in fiscal 2022[171](index=171&type=chunk) - Cash dividends declared and paid totaled **$11.1 million** in fiscal 2022[171](index=171&type=chunk) - Share repurchases amounted to **$8.5 million** in fiscal 2022, reducing additional paid-in capital[171](index=171&type=chunk) - Share-based compensation expense was **$3.8 million** in fiscal 2022[171](index=171&type=chunk) [Consolidated Statements of Cash Flows](index=40&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash provided by operating activities slightly decreased to **$42.8 million** in fiscal 2022, while investing activities decreased, and financing activities provided **$7.4 million** Consolidated Statements of Cash Flows (In thousands) | Cash Flow Activity | Fiscal 2022 | Fiscal 2021 | Fiscal 2020 | | :-------------------------------- | :---------- | :---------- | :---------- | | Net cash provided by operating activities | $42,837 | $43,793 | $58,902 | | Net cash used in investing activities | $(49,756) | $(71,432) | $(24,203) | | Net cash provided by (used in) financing activities | $7,417 | $26,360 | $(39,621) | | Net increase (decrease) in cash and cash equivalents | $498 | $(1,279) | $(4,922) | | Cash and cash equivalents - end of year | $3,496 | $2,998 | $4,277 | - The decrease in operating cash flow was driven by higher inventory levels (**$30.0 million increase**) and increases in customer receivables (**$30.5 million increase**), partially offset by increased net income and accounts payable[120](index=120&type=chunk)[172](index=172&type=chunk) - Additions to property, plant, and equipment were **$28.5 million** in fiscal 2022[172](index=172&type=chunk) - Acquisitions used **$21.5 million** in cash in fiscal 2022[172](index=172&type=chunk) - Net debt borrowings were **$27.0 million** in fiscal 2022 (**$42.0 million borrowings minus $15.0 million payments**)[122](index=122&type=chunk)[172](index=172&type=chunk) [Notes to Consolidated Financial Statements](index=41&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed information on accounting policies, acquisitions, revenue recognition, debt, and other financial statement components, clarifying the basis for reporting [Note 1 — Nature of Business and Significant Accounting Policies](index=41&type=section&id=Note%201%20%E2%80%94%20Nature%20of%20Business%20and%20Significant%20Accounting%20Policies) This note details Hawkins, Inc.'s three reportable segments, fiscal year, principles of consolidation, and key accounting policies for revenue, inventory, fair value, and derivatives - The company's fiscal year is a **52 or 53-week year** ending on the Sunday closest to March 31; fiscal 2022 was **53 weeks**[175](index=175&type=chunk) - Revenue is recognized at the point in time when control of promised products is transferred to the customer, net of estimated returns and rebates[177](index=177&type=chunk) - Inventories are primarily valued at the lower of cost or net realizable value, with **73% using LIFO** and **27% using FIFO**[190](index=190&type=chunk) - Goodwill is tested at least annually for impairment, with the last qualitative assessment as of December 27, 2021, indicating **no impairment**[199](index=199&type=chunk) - Identifiable intangible assets with finite lives are amortized over an average remaining useful life of approximately **12 years**, while indefinite-life intangibles are not amortized but tested for impairment annually[201](index=201&type=chunk) - The company accounts for income taxes using the asset and liability method and recognizes stock-based compensation on a fair value basis[204](index=204&type=chunk)[206](index=206&type=chunk) - An interest rate swap is designated as a cash flow hedge, with changes in fair value recorded in other comprehensive income[209](index=209&type=chunk) [Note 2 — Acquisitions](index=46&type=section&id=Note%202%20%E2%80%94%20Acquisitions) In fiscal 2022, Hawkins, Inc. completed **three Water Treatment segment acquisitions** totaling **$21.1 million**, expanding geographic reach and adding goodwill; fiscal 2021 also saw significant acquisitions - Acquired NAPCO Chemical Company on December 30, 2021, for **$19.0 million**, adding water treatment chemical manufacturing and distribution in Texas, with **$9.4 million** allocated to finite-lived intangible assets and **$4.5 million** to goodwill[215](index=215&type=chunk)[216](index=216&type=chunk) - Acquired Water and Waste Specialties, Inc. on October 29, 2021, for **$1.4 million**, expanding water treatment chemical distribution in Alabama, with **$0.5 million** allocated to finite-lived intangible assets and **$0.5 million** to goodwill[217](index=217&type=chunk)[218](index=218&type=chunk) - Acquired Southeast Water Systems LLC on September 20, 2021, for up to **$2.2 million** (including **$1.0 million contingent consideration**), adding water treatment chemical equipment supply and installation in Alabama, Georgia, and Florida panhandle, with **$1.7 million** to goodwill[219](index=219&type=chunk)[220](index=220&type=chunk) - In fiscal 2021, acquired C&L Aqua Professionals, Inc. and LC Blending, Inc. for **$16 million**, expanding water treatment distribution in Louisiana, with **$8.2 million** allocated to finite-lived intangible assets and **$3.1 million** to goodwill[223](index=223&type=chunk)[224](index=224&type=chunk) - In fiscal 2021, acquired a manufacturing facility in Rosemount, MN, for **$10 million**, adding **40,000 sq ft** of space on **28 acres** for Industrial and Water Treatment segments[225](index=225&type=chunk)[226](index=226&type=chunk) - In fiscal 2021, acquired American Development Corporation of Tennessee, Inc. (ADC) for **$25 million**, expanding water treatment distribution in Tennessee, Georgia, and Kentucky, with **$13.3 million** allocated to finite-lived intangible assets and **$9.2 million** to goodwill[227](index=227&type=chunk)[228](index=228&type=chunk) [Note 3 — Revenue](index=48&type=section&id=Note%203%20%E2%80%94%20Revenue) Hawkins, Inc. disaggregates external customer net sales by operating segment and product type, with total sales of **$774.5 million** in fiscal 2022, primarily from manufactured products External Customer Net Sales by Major Revenue Stream (In thousands) | Revenue Stream | Industrial (FY22) | Water Treatment (FY22) | Health and Nutrition (FY22) | Total (FY22) | Industrial (FY21) | Water Treatment (FY21) | Health and Nutrition (FY21) | Total (FY21) | | :---------------------------------- | :---------------- | :--------------------- | :-------------------------- | :----------- | :---------------- | :--------------------- | :-------------------------- | :----------- | | Manufactured, blended or repackaged products | $318,514 | $205,350 | $34,690 | $558,554 | $231,427 | $152,694 | $38,270 | $422,391 | | Distributed specialty products | $— | $— | $124,312 | $124,312 | $— | $— | $115,317 | $115,317 | | Bulk products | $61,443 | $20,211 | $— | $81,654 | $38,378 | $16,067 | $— | $54,445 | | Other | $6,981 | $2,572 | $468 | $10,021 | $3,556 | $1,243 | $(81) | $4,718 | | **Total external customer sales** | **$386,938** | **$228,133** | **$159,470** | **$774,541** | **$273,361** | **$170,004** | **$153,506** | **$596,871** | - Manufactured, blended or repackaged products saw a **32.2% increase in sales** from **$422.4 million in fiscal 2021 to $558.6 million in fiscal 2022**[232](index=232&type=chunk) - Bulk products sales increased by **50%** from **$54.4 million in fiscal 2021 to $81.7 million in fiscal 2022**[232](index=232&type=chunk) [Note 4 — Derivative Instruments](index=49&type=section&id=Note%204%20%E2%80%94%20Derivative%20Instruments) Hawkins, Inc. uses a **$60 million interest rate swap** as a cash flow hedge to manage variable-rate debt risk, recording **$1.3 million** in unrealized gains in fiscal 2022 - The company has a **$60 million interest rate swap agreement**, designated as a cash flow hedge, terminating on May 1, 2027, to manage variable-rate debt risk[235](index=235&type=chunk) - Unrealized gains (net of tax) on the cash flow hedge were **$1.3 million in fiscal 2022**, compared to **$0.1 million in fiscal 2021**[237](index=237&type=chunk) - A previous **$20 million swap agreement** terminated on December 23, 2020[236](index=236&type=chunk) [Note 5 – Fair Value Measurements](index=49&type=section&id=Note%205%20%E2%80%93%20Fair%20Value%20Measurements) Hawkins, Inc. measures financial assets and liabilities at fair value, classifying them into Level 1 (deferred compensation plan assets) and Level 2 (interest rate swap) based on input transparency - Fair value measurements are classified into Level 1 (quoted prices in active markets) and Level 2 (observable market data for similar assets/liabilities)[183](index=183&type=chunk)[184](index=184&type=chunk)[186](index=186&type=chunk)[240](index=240&type=chunk) - Deferred compensation plan assets are measured at Level 1 fair value, totaling **$7.0 million in fiscal 2022** and **$5.9 million in fiscal 2021**[241](index=241&type=chunk)[243](index=243&type=chunk) - The interest rate swap is measured at Level 2 fair value, totaling **$1.8 million in fiscal 2022**[241](index=241&type=chunk)[243](index=243&type=chunk) [Note 6 – Assets Held for Sale](index=50&type=section&id=Note%206%20%E2%80%93%20Assets%20Held%20for%20Sale) As of April 3, 2022, Hawkins, Inc. had no assets classified as held for sale, with previous assets sold in the first quarter of fiscal 2022 - No assets were classified as held for sale as of April 3, 2022[246](index=246&type=chunk) - As of March 28, 2021, assets held for sale included a **$0.7 million office building** and a **$0.2 million water treatment branch**, both sold in Q1 fiscal 2022[246](index=246&type=chunk) [Note 7 — Inventories](index=50&type=section&id=Note%207%20%E2%80%94%20Inventories) Inventories for Hawkins, Inc. increased significantly to **$95.0 million** in fiscal 2022, with the LIFO reserve also rising substantially to **$21.3 million** due to rising input costs Inventories (In thousands) | Inventory Component | April 3, 2022 | March 28, 2021 | | :-------------------- | :------------ | :------------- | | Inventory (FIFO basis) | $116,325 | $69,438 | | LIFO reserve | $(21,340) | $(5,574) | | Net inventory | $94,985 | $63,864 | - The FIFO value of LIFO inventories was **$83.7 million at April 3, 2022**, and **$46.8 million at March 28, 2021**[247](index=247&type=chunk) - The LIFO reserve increased by **$15.8 million in fiscal 2022**, primarily due to rising input costs[111](index=111&type=chunk)[247](index=247&type=chunk) [Note 8 — Goodwill and Other Identifiable Intangible Assets](index=51&type=section&id=Note%208%20%E2%80%94%20Goodwill%20and%20Other%20Identifiable%20Intangible%20Assets) Goodwill increased to **$77.4 million** in fiscal 2022 due to Water Treatment acquisitions, and identifiable intangible assets, net, rose to **$80.2 million**, with amortization expense of **$6.5 million** Goodwill by Segment (In thousands) | Segment | March 28, 2021 Balance | Additions due to acquisitions (FY22) | April 3, 2022 Balance | | :-------------------- | :--------------------- | :----------------------------------- | :-------------------- | | Industrial | $6,495 | $— | $6,495 | | Water Treatment | $19,280 | $6,681 | $25,961 | | Health and Nutrition | $44,945 | $— | $44,945 | | **Total** | **$70,720** | **$6,681** | **$77,401** | Identifiable Intangible Assets, Net (In thousands) | Intangible Asset Type | April 3, 2022 Net Carrying Value | March 28, 2021 Net Carrying Value | | :-------------------------- | :------------------------------- | :-------------------------------- | | Customer relationships | $77,245 | $73,066 | | Trademarks and trade names | $1,624 | $1,935 | | Other finite-life intangible assets | $97 | $140 | | Indefinite-life intangible assets | $1,227 | $1,227 | | **Total intangible assets, net** | **$80,193** | **$76,368** | - Intangible asset amortization expense was **$6.5 million in fiscal 2022**, **$5.8 million in fiscal 2021**, and **$5.1 million in fiscal 2020**[251](index=251&type=chunk) Estimated Future Amortization Expense (In thousands) | Fiscal Year | Intangible Assets | | :---------- | :---------------- | | 2023 | $6,923 | | 2024 | $6,707 | | 2025 | $6,707 | | 2026 | $6,606 | | 2027 | $6,305 | | Thereafter | $45,718 | | **Total** | **$78,966** | [Note 9 – Debt](index=52&type=section&id=Note%209%20%E2%80%93%20Debt) On March 31, 2022, Hawkins, Inc. refinanced its credit facility, establishing a new **$250 million revolving loan facility** with **$126.0 million outstanding** at **1.2%** interest, and was in compliance with all covenants - The new **$250 million senior secured revolving loan facility** matures on April 30, 2027, and is secured by substantially all personal property assets[255](index=255&type=chunk) - Outstanding balance on the revolving loan was **$126.0 million** as of April 3, 2022, with an effective interest rate of **1.2%**[257](index=257&type=chunk)[260](index=260&type=chunk) - The credit agreement requires maintaining a minimum fixed charge coverage ratio of **1.15 to 1.00** and a maximum total cash flow leverage ratio of **3.0 to 1.0**[259](index=259&type=chunk) - The company was in compliance with all required covenants as of April 3, 2022[259](index=259&type=chunk) Debt (In thousands) | Debt Component | April 3, 2022 | March 28, 2021 | | :---------------------------------------------------- | :------------ | :------------- | | Senior secured revolving loan | $126,000 | $99,000 | | Less: unamortized debt issuance costs | $(443) | $(248) | | Total debt, net of debt issuance costs | $125,557 | $98,752 | | Less: current portion of long-term debt, net of current unamortized debt issuance costs | $(9,913) | $(9,907) | | **Total long-term debt** | **$115,644** | **$88,845** | [Note 10 — Share-Based Compensation](index=53&type=section&id=Note%2010%20%E2%80%94%20Share-Based%20Compensation) Hawkins, Inc. grants performance-based restricted stock units and restricted stock awards, with total compensation expense for performance units at **$2.9 million** and director awards at **$0.3 million** in fiscal 2022 Performance-Based Restricted Stock Unit Activity | Metric | Fiscal 2022 | Fiscal 2021 | Fiscal 2020 | | :-------------------------------- | :---------- | :---------- | :---------- | | Shares Granted | 111,618 | 129,626 | 138,504 | | Weighted Average Grant Date Fair Value (Granted) | $31.74 | $18.69 | $17.25 | | Compensation Expense (in millions) | $2.9 | $2.5 | $1.5 | | Total Fair Value Vested (in millions) | $2.1 | $0.2 | $1.3 | - Unrecognized compensation expense for non-vested restricted stock and units was **$3.9 million** as of April 3, 2022, expected to be recognized over a weighted average period of **1.2 years**[265](index=265&type=chunk) Board's Restricted Stock Activity | Metric | Fiscal 2022 | Fiscal 2021 | Fiscal 2020 | | :-------------------------------- | :---------- | :---------- | :---------- | | Shares Granted | 10,287 | 13,186 | 16,016 | | Weighted Average Grant Date Fair Value (Granted) | $32.80 | $25.59 | $21.84 | | Annual Expense (in millions) | $0.3 | $0.3 | $0.3 | - Unrecognized compensation expense for non-vested restricted stock awards was **$0.1 million** as of April 3, 2022, expected to be recognized over a weighted average period of **0.3 years**[269](index=269&type=chunk) [Note 11 — Share Repurchases](index=54&type=section&id=Note%2011%20%E2%80%94%20Share%20Repurchases) The board authorized the repurchase of up to **1,600,000 common shares**; in fiscal 2022, **240,501 shares** were repurchased for **$8.5 million**, with **311,005 shares** remaining available - The board authorized the repurchase of up to **1,600,000 common shares**[270](index=270&type=chunk) - In fiscal 2022, **240,501 common shares** were repurchased for an aggregate of **$8.5 million**[270](index=270&type=chunk) - As of April 3, 2022, **311,005 shares** were available for repurchase under the program[270](index=270&type=chunk) [Note 12 — Profit Sharing, Employee Stock Ownership, Employee Stock Purchase and Pension Plans](index=54&type=section&id=Note%2012%20%E2%80%94%20Profit%20Sharing%2C%20Employee%20Stock%20Ownership%2C%20Employee%20Stock%20Purchase%20and%20Pension%20Plans) Hawkins, Inc. offers various company-sponsored plans, including profit sharing, 401(k) matching, ESOPs, and an ESPP, with total contribution expense of **$7.7 million** in fiscal 2022 - Company-sponsored plans include profit sharing, 401(k) matching, two ESOPs, a nonqualified deferred compensation plan, and an ESPP[271](index=271&type=chunk)[272](index=272&type=chunk)[275](index=275&type=chunk)[276](index=276&type=chunk) Total Contribution Expense for Company-Sponsored Plans (In thousands) | Plan Type | Fiscal 2022 | Fiscal 2021 | Fiscal 2020 | | :-------------------------------- | :---------- | :---------- | :---------- | | Non-bargaining unit employee plans: | | | | | Profit sharing | $1,056 | $994 | $631 | | 401(k) matching contributions | $3,122 | $2,650 | $2,399 | | ESOP | $1,056 | $994 | $631 | | Nonqualified deferred compensation plan | $1,355 | $1,327 | $1,262 | | Bargaining unit employee plans | $589 | $555 | $481 | | ESPP - all employees | $549 | $556 | $431 | | **Total contribution expense** | **$7,727** | **$7,076** | **$5,835** | - Payments of approximately **$0.5 million per year** are being made through **2034** for a multiemployer pension plan withdrawal liability[276](index=276&type=chunk) [Note 13 — Commitments and Contingencies](index=55&type=section&id=Note%2013%20%E2%80%94%20Commitments%20and%20Contingencies) Hawkins, Inc. has no material pending legal proceedings beyond routine litigation and has asset retirement obligations for three land leases, but no liability is recorded due to estimation difficulties - No material pending legal proceedings were reported, other than ordinary routine litigation incidental to the business[277](index=277&type=chunk) - The company has asset retirement obligations for **three land leases** expiring between **2023 and 2044**, but has not recorded a liability due to inability to reasonably estimate fair value[278](index=278&type=chunk) - Factors preventing reasonable estimation include long lease terms, history of lease extensions, lessors' lack of termination history, and potential future value of buildings[278](index=278&type=chunk) [Note 14 — Income Taxes](index=56&type=section&id=Note%2014%20%E2%80%94%20Income%20Taxes) Hawkins, Inc.'s total income tax provision was **$18.4 million** in fiscal 2022, with an effective tax rate of **26.3%**, and the company maintains a net deferred tax liability of **$23.4 million** Provisions for Income Taxes (In thousands) | Tax Type | Fiscal 2022 | Fiscal 2021 | Fiscal 2020 | | :---------------- | :---------- | :---------- | :---------- | | Federal — current | $14,736 | $11,169 | $8,447 | | State — current | $5,202 | $4,391 | $3,563 | | Total current | $19,938 | $15,560 | $12,010 | | Federal — deferred | $(1,054) | $(302) | $(976) | | State — deferred | $(447) | $(387) | $(445) | | Total deferred | $(1,501) | $(689) | $(1,421) | | **Total provision** | **$18,437** | **$14,871** | **$10,589** | Reconciliation of Income Tax Rate | Component | Fiscal 2022 | Fiscal 2021 | Fiscal 2020 | | :-------------------------------- | :---------- | :---------- | :---------- | | Statutory federal income tax | 21.0% | 21.0% | 21.0% | | State income taxes, net of federal deduction | 5.6% | 5.9% | 5.7% | | ESOP dividend deduction on allocated shares | (0.2)% | (0.2)% | (0.3)% | | Other — net | (0.1)% | (0.1)% | 0.8% | | **Total effective tax rate** | **26.3%** | **26.6%** | **27.2%** | Net Deferred Tax Liabilities (In thousands) | Component | April 3, 2022 | March 28, 2021 | | :-------------------------------- | :------------ | :------------- | | Total deferred tax assets | $9,185 | $8,892 | | Total deferred tax liabilities | $(32,607) | $(33,337) | | **Net deferred tax liabilities** | **$(23,422)** | **$(24,445)** | - The company expects to realize its deferred tax assets through future taxable income or reversals of taxable temporary differences[283](index=283&type=chunk) [Note 15 – Leases](index=57&type=section&id=Note%2015%20%E2%80%93%20Leases) Hawkins, Inc. has operating lease agreements for various assets with terms from **1 to 23 years**, incurring **$2.9 million** in lease expense in fiscal 2022, with a weighted average remaining term of **8.91 years** - Operating lease agreements cover manufacturing facilities, warehouse space, land, vehicles, and IT equipment, with terms from **1 to 23 years**, including options to extend up to **15 years**[287](index=287&type=chunk) - Total lease expense was **$2.9 million for fiscal 2022**, a slight increase from **$2.8 million in fiscal 2021**[288](index=288&type=chunk) Operating Lease Information | Metric | April 3, 2022 | March 28, 2021 | | :-------------------------------- | :------------ | :------------- | | Weighted average remaining lease term (years) | 8.91 | 9.73 | | Weighted average discount rate | 2.6% | 2.7% | Maturities of Lease Liabilities (In thousands) | Fiscal Year | Operating Leases | | :---------- | :--------------- | | 2023 | $1,889 | | 2024 | $1,515 | | 2025 | $1,450 | | 2026 | $1,388 | | 2027 | $1,359 | | Thereafter | $5,171 | | **Total** | **$12,772** | | Less: Interest | $(1,972) | | **Present value of lease liabilities** | **$10,800** | [Note 16 — Segment Information](index=58&type=section&id=Note%2016%20%E2%80%94%20Segment%20Information) Hawkins, Inc. reports financial performance across its Industrial, Water Treatment, and Health and Nutrition segments, with all segments showing increased sales and gross profit in fiscal 2022 Segment Performance (Fiscal Year Ended April 3, 2022, In thousands) | Metric | Industrial | Water Treatment | Health and Nutrition | Total | | :-------------------------------- | :--------- | :-------------- | :------------------- | :---- | | Sales | $386,938 | $228,133 | $159,470 | $774,541 | | Gross profit | $59,606 | $54,571 | $32,343 | $146,520 | | Selling, general, and administrative expenses | $28,127 | $31,357 | $15,842 | $75,326 | | Operating income | $31,479 | $23,214 | $16,501 | $71,194 | | Identifiable assets | $236,934 | $143,889 | $167,034 | $547,857 | | Capital expenditures | $18,812 | $8,939 | $761 | $28,512 | Segment Performance (Fiscal Year Ended March 28, 2021, In thousands) | Metric | Industrial | Water Treatment | Health and Nutrition | Total | | :-------------------------------- | :--------- | :-------------- | :------------------- | :---- | | Sales | $273,361 | $170,004 | $153,506 | $596,871 | | Gross profit | $43,337 | $46,793 | $33,632 | $123,762 | | Selling, general, and administrative expenses | $27,033 | $24,453 | $16,398 | $67,884 | | Operating income | $16,304 | $22,340 | $17,234 | $55,878 | | Identifiable assets | $181,478 | $109,761 | $166,558 | $457,797 | | Capital expenditures | $13,713 | $6,732 | $349 | $20,794 | - Industrial segment sales increased by **41.5%** from **$273.4 million in fiscal 2021 to $386.9 million in fiscal 2022**[294](index=294&type=chunk) - Water Treatment segment identifiable assets increased by **31.1%** from **$109.8 million in fiscal 2021 to $143.9 million in fiscal 2022**, largely due to acquisitions[294](index=294&type=chunk) [ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=59&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) Hawkins, Inc. reported no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure were reported[296](index=296&type=chunk) [ITEM 9A. Controls and Procedures](index=59&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of April 3, 2022, with an attestation report from the independent auditor - Disclosure controls and procedures were deemed **effective** as of April 3, 2022[297](index=297&type=chunk) - Management assessed internal control over financial reporting as **effective**, excluding the NAPCO Chemical Company, Inc. acquisition due to insufficient time for assessment[300](index=300&type=chunk) - The independent registered public accounting firm issued an attestation report confirming the **effectiveness of internal control over financial reporting**[301](index=301&type=chunk) - No material changes in internal control over financial reporting occurred during the fourth quarter of fiscal 2022[302](index=302&type=chunk) [ITEM 9B. Other Information](index=61&type=section&id=Item%209B.%20Other%20Information) This item contains no other information - No other information was reported[304](index=304&type=chunk) [ITEM 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections](index=61&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20That%20Prevent%20Inspections) This item is not applicable to Hawkins, Inc - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable[305](index=305&type=chunk) PART III [ITEM 10. Directors, Executive Officers, and Corporate Governance](index=62&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) This section provides information on Hawkins, Inc.'s executive officers and directors, including their backgrounds, and incorporates disclosures on corporate governance and the Code of Business Conduct and Ethics Executive Officers | Name | Age | Office | | :------------------ | :-- | :---------------------------------------------------- | | Patrick H. Hawkins | 51 | Chief Executive Officer and President | | Jeffrey P. Oldenkamp | 49 | Executive Vice President, Chief Financial Officer and Treasurer | | Richard G. Erstad | 58 | Vice President, General Counsel and Secretary | | Drew M. Grahek | 52 | Vice President — Operations | | Douglas A. Lange | 52 | Vice President — Water Treatment Group | | David J. Mangine | 64 | Vice President — Industrial Group | | Theresa R. Moran | 59 | Vice President — Purchasing, Logistics and Sales Support | | Shirley A. Rozeboom | 60 | Vice President — Health and Nutrition | - Patrick H. Hawkins has served as **CEO and President since 2011**, joining the company in 1992[308](index=308&type=chunk) - Jeffrey P. Oldenkamp became Executive Vice President, CFO, and Treasurer in October 2021, having joined Hawkins in May 2017[309](index=309&type=chunk) - The company has adopted a Code of Business Conduct and Ethics applicable to all directors and employees, available on its website[317](index=317&type=chunk) [ITEM 11. Executive Compensation](index=64&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's 2022 Proxy Statement - Executive compensation details are incorporated by reference from the 2022 Proxy Statement[318](index=318&type=chunk) [ITEM 12. Security Ownership of Certain Beneficial Owners and Management And Related Stockholder Matters](index=64&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20And%20Related%20Stockholder%20Matters) Information on security ownership by certain beneficial owners and management, as well as equity compensation plan information, is incorporated by reference from the company's 2022 Proxy Statement - Security ownership and equity compensation plan information are incorporated by reference from the 2022 Proxy Statement[319](index=319&type=chunk) [ITEM 13. Certain Relationships and Related Transactions, and Director Independence](index=64&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information concerning certain relationships and related transactions, along with director independence, is incorporated by reference from the company's 2022 Proxy Statement - Details on certain relationships, related transactions, and director independence are incorporated by reference from the 2022 Proxy Statement[320](index=320&type=chunk) [ITEM 14. Principal Accountant Fees and Services](index=64&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's 2022 Proxy Statement - Principal accountant fees and services information is incorporated by reference from the 2022 Proxy Statement[321](index=321&type=chunk) PART IV [ITEM 15. Exhibits and Financial Statement Schedules](index=65&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, supplementary data, and exhibits filed as part of the Annual Report on Form 10-K, including auditor reports and a detailed exhibit index - The section includes reports of Independent Registered Public Accounting Firms, Consolidated Balance Sheets, Statements of Income, Comprehensive Income, Shareholders' Equity, Cash Flows, and Notes to Consolidated Financial Statements[324](index=324&type=chunk)[325](index=325&type=chunk) - Financial statement schedule II, 'Valuation and Qualifying Accounts,' is included for fiscal years 2022, 2021, and 2020[327](index=327&type=chunk)[338](index=338&type=chunk) - A comprehensive Exhibit Index details various documents, including articles of incorporation, by-laws, credit agreements, incentive plans, and certifications, with their respective filing methods[330](index=330&type=chunk) [ITEM 16. Form 10-K Summary](index=67&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item indicates that no Form 10-K Summary is provided - No Form 10-K Summary is provided[331](index=331&type=chunk) [SIGNATURES](index=68&type=section&id=SIGNATURES) The report is duly signed on behalf of Hawkins, Inc. by its CEO and President, Patrick H. Hawkins, and its Executive VP and CFO, Jeffrey P. Oldenkamp, as of May 18, 2022 - The report is signed by Patrick H. Hawkins (CEO, President, and Director) and Jeffrey P. Oldenkamp (Executive VP, CFO, and Principal Accounting Officer) on May 18, 2022[333](index=333&type=chunk)[335](index=335&type=chunk)[336](index=336&type=chunk) - Other directors' signatures are provided by Patrick H. Hawkins as attorney-in-fact[335](index=335&type=chunk)[336](index=336&type=chunk)