Hawkins Inc.
Annual Report 2019

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-KANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended March 31, 2019Commission File No. 0-7647 HAWKINS, INC.(Exact Name of Registrant as Specified in its Charter) Minnesota 41-0771293(State of Incorporation) (I.R.S. EmployerIdentification No.)2381 Rosegate, Roseville, Minnesota 55113(Address of Principal Executive Offices) (Zip Code)(612) 331-6910(Registrant’s Telephone Number, Including Area Code)Securities registered pursuant to Section 12(b) of the Act: Title of each classTrading Symbol:Name of exchange on which registered: Common Stock, par value $.05 per shareHWKNNasdaq Stock Market LLCSecurities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þIndicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the precedingtwelve months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past90 days. Yes þ No ¨Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T duringthe preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes þ No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growthcompany. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.Large accelerated filer ¨ Accelerated filerþNon-accelerated filer¨ Smaller reporting companyo Emerging growth companyoIf an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þThe aggregate market value of voting stock held by non-affiliates of the Registrant on September 30, 2018 (the last business day of the Registrant’s most recently completedsecond fiscal quarter) was approximately $400.2 million based upon the closing sale price for the Registrant’s common stock on that date as reported by The Nasdaq Stock MarketLLC, excluding all shares held by officers and directors of the Registrant and by the Trustees of the Registrant’s Employee Stock Ownership Plan and Trust.As of May 17, 2019, the Registrant had 10,624,525 shares of common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCEPortions of our definitive Proxy Statement for the annual meeting of shareholders to be held August 1, 2019, are incorporated by reference in Part III of thisAnnual Report on Form 10-K FORWARD-LOOKING STATEMENTSThe information presented in this Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements have been made pursuant to the provisions of the PrivateSecurities Litigation Reform Act of 1995. These statements are not historical facts, but rather are based on our current expectations, estimates and projections,and our beliefs and assumptions. Words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate,” “will” and similar expressions mayidentify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors,some of which are beyond our control and are difficult to predict. These factors could cause actual results to differ materially from those expressed orforecasted in the forward-looking statements. These risks and uncertainties are described in the risk factors and elsewhere in this Annual Report on Form 10-K. We caution you not to place undue reliance on these forward-looking statements, which reflect our management’s view only as of the date of this AnnualReport on Form 10-K. We are not obligated to update these statements or publicly release the result of any revisions to them to reflect events or circumstancesafter the date of this Annual Report on Form 10-K or to reflect the occurrence of unanticipated events.As used in this Annual Report on Form 10-K, except where otherwise stated or indicated by the context, “Hawkins,” “we,” “us,” “the Company,” “our,” or“the Registrant” means Hawkins, Inc. References to “fiscal 2020” means our fiscal year ending March 29, 2020, “fiscal 2019” means our fiscal year endedMarch 31, 2019, “fiscal 2018” means our fiscal year ended April 1, 2018, “fiscal 2017” means our fiscal year ended April 2, 2017, and “fiscal 2016” meansour fiscal year ended April 3, 2016.iiHawkins, Inc.Annual Report on Form 10-KFor the Fiscal Year Ended March 31, 2019 PagePART IITEM 1.Business1ITEM 1A.Risk Factors4ITEM 1B.Unresolved Staff Comments10ITEM 2.Properties11ITEM 3.Legal Proceedings11ITEM 4.Mine Safety Disclosures11PART IIITEM 5.Market for the Company’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities12ITEM 6.Selected Financial Data14ITEM 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations14ITEM 7A.Quantitative and Qualitative Disclosures about Market Risk22ITEM 8.Financial Statements and Supplementary Data23ITEM 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure45ITEM 9A.Controls and Procedures45ITEM 9B.Other Information46PART IIIITEM 10.Directors, Executive Officers, and Corporate Governance47ITEM 11.Executive Compensation48ITEM 12.Security Ownership of Certain Beneficial Owners and Management And Related Stockholder Matters48ITEM 13.Certain Relationships and Related Transactions, and Director Independence48ITEM 14.Principal Accountant Fees and Services48PART IVITEM 15.Exhibits and Financial Statement Schedules49ITEM 16.Form 10-K Summary51iiiPART I ITEM 1. BUSINESSHawkins, Inc. distributes, blends and manufactures chemicals and specialty ingredients for our customers in a wide variety of industries. We began ouroperations primarily as a distributor of bulk chemicals with a strong customer focus. Over the years, we have maintained our strong customer focus and haveexpanded our business by increasing our sales of value-added chemical products and specialty ingredients, including manufacturing, blending andrepackaging certain products. We believe that we create value for our customers through superb service and support, quality products, personalizedapplications and trustworthy, creative employees.We currently conduct our business in three segments: Industrial, Water Treatment, and Health and Nutrition. Our Health and Nutrition segment wasestablished as a result of our acquisition of Stauber Performance Ingredients (“Stauber”) in fiscal 2016.Industrial Segment. Our Industrial Group specializes in providing industrial chemicals, products and services to industries such as agriculture, chemicalprocessing, electronics, energy, food, pharmaceutical and plating. This group’s principal products are acids, alkalis and industrial and food-grade salts.The Industrial Group:•Receives, stores and distributes various chemicals in bulk quantities, including liquid caustic soda, sulfuric acid, hydrochloric acid, urea, phosphoricacid, aqua ammonia and potassium hydroxide;•Manufactures sodium hypochlorite (bleach), agricultural products and certain food-grade products, including liquid phosphates, lactates and otherblended products;•Repackages water treatment chemicals for our Water Treatment Group and bulk industrial chemicals to sell in smaller quantities to our customers;•Performs custom blending of chemicals according to customer formulas and specifications; and•Performs contract and private label bleach packaging.The group’s sales are concentrated primarily in Illinois, Iowa, Kentucky, Minnesota, Missouri, North Carolina, North Dakota, South Dakota, Tennessee andWisconsin, while the group’s products sold into the food and pharmaceutical markets are sold nationally. The Industrial Group relies on a specially trainedsales staff that works directly with customers on their specific needs. The group conducts its business primarily through distribution centers and terminaloperations. Agricultural sales within this group tend to be seasonal, with higher sales due to the application of fertilizer during the planting season of Marchthrough June given the regions of the country where we are located.Water Treatment Segment. Our Water Treatment Group specializes in providing chemicals, equipment and solutions for potable water, municipal andindustrial wastewater, industrial process water and non-residential swimming pool water. This group has the resources and flexibility to treat systems rangingin size from a single small well to a multi-million-gallon-per-day facility.The group utilizes delivery routes operated by our employees who typically serve as route driver, salesperson and trained technician to deliver our productsand diagnose our customers’ water treatment needs. We believe that the high level of service provided by these individuals allows us to serve as the trustedwater treatment expert for many of the municipalities and other customers that we serve. We also believe that there are significant synergies between ourWater Treatment and Industrial Groups in that we are able to obtain a competitive cost position on many of the chemicals sold by the Water Treatment Groupdue to the volumes of these chemicals purchased by our Industrial Group. In addition, our Industrial and Water Treatment groups share certain resources,which leverage fixed costs across both groups.The group operates out of 29 warehouses supplying products and services to customers primarily in Florida, Illinois, Iowa, Kansas, Minnesota, Missouri,Nebraska, North Dakota, South Dakota and Wisconsin. We expect to invest in existing and new branches to expand the group’s geographic coverage. OurWater Treatment Group has historically experienced higher sales during April to September, primarily due to a seasonal increase in chemicals used bymunicipal water treatment facilities.1Health and Nutrition Segment. We established the Health and Nutrition segment of our business in fiscal 2016 through our acquisition of Stauber. Throughsales of distributed specialty products and our manufactured products, our Health and Nutrition Group specializes in providing ingredient distribution,processing and formulation solutions to manufacturers of nutraceutical, functional food and beverage, personal care, dietary supplement and other nutritionalfood, health and wellness products. This group offers a diverse product portfolio including minerals, botanicals and herbs, vitamins and amino acids,excipients, joint products, sweeteners and enzymes.The Health and Nutrition Group relies on a specially trained sales and product development staff that works directly with customers on their specific needs.The group’s extensive product portfolio combined with value-added services, including product formulation, sourcing and distribution, processing andblending and quality control and compliance, positions this group as a one-stop ingredient solutions provider to its customers. The group operates out offacilities in California and New York and its products are sold nationally and, in certain cases, internationally.Raw Materials. We have numerous suppliers, including many of the major chemical producers in the United States. We source our health and nutritioningredients from a wide array of domestic and international vendors. We typically have distributorship agreements or supply contracts with our suppliers thatare periodically renewed. We believe that most of the products we purchase can be obtained from alternative sources should existing relationships beterminated. We are dependent upon the availability of our raw materials. While we believe that we have adequate sources of supply for our raw material andproduct requirements, we cannot be sure that supplies will be consistently available in the future. In the event that certain raw materials become generallyunavailable, suppliers may extend lead times or limit or cut off the supply of materials to us. As a result, we may not be able to supply or manufactureproducts for our customers.Intellectual Property. Our intellectual property portfolio is of economic importance to our business. When appropriate, we have pursued, and we willcontinue to pursue, patents covering our products. We also have obtained certain trademarks for our products to distinguish them from our competitors’products. We regard much of the formulae, information and processes that we generate and use in the conduct of our business as proprietary and protectableunder applicable copyright, patent, trademark, trade secret and unfair competition laws.Customer Concentration. In fiscal 2019, none of our customers accounted for 10% or more of our total sales. Sales to our largest customer, which is in ourIndustrial segment, represented approximately 4-5% of our total sales in each of fiscal 2019, 2018 and 2017. Aggregate sales to our five largest customers,three of which are currently in our Industrial segment and two of which are in our Health and Nutrition segment for fiscal 2019, represented approximately12% of our total sales in each of fiscal 2019, 2018 and 2017. No other customer represented more than 2% of our total sales in fiscal 2019. The loss of any ofour largest customers, or a substantial portion of their business, could have a material adverse effect on our results of operations.Competition. We operate in a competitive industry and compete with many producers, distributors and sales agents offering products equivalent tosubstantially all of the products we offer. Many of our competitors are larger than we are and may have greater financial resources, although no onecompetitor is dominant in all of the markets we serve. We compete by offering quality products at competitive prices coupled with outstanding customerservice and value-added services or product formulation where needed. Because of our long-standing relationships with many of our suppliers, we are oftenable to leverage those relationships to obtain products when supplies are limited or to obtain competitive pricing.Working Capital. Due to the nature of our operations, which includes purchases of large quantities of bulk chemicals, the timing of purchases can result insignificant changes in working capital and the resulting operating cash flow. Historically, our cash requirements for working capital increase during theperiod from April through November as caustic soda inventory levels increase with most of our barges received during this period. Additionally, due toseasonality of the Water Treatment business, our accounts receivable balance is generally higher during the period of April through September.Employees. We had 657 employees as of March 31, 2019, including 72 covered by collective bargaining agreements.About Us. Hawkins, Inc. was founded in 1938 and incorporated in Minnesota in 1955. We became a publicly-traded company in 1972. Our principalexecutive offices are located at 2381 Rosegate, Roseville, Minnesota.Available Information. Our Internet address is www.hawkinsinc.com. We have made available, free of charge, our Annual Reports on Form 10-K, QuarterlyReports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports, as soon as reasonably practicable after weelectronically file these materials with, or furnish them to, the Securities and Exchange Commission. Reports of beneficial ownership filed by our directorsand executive officers pursuant to Section 16(a) of the Exchange2Act are also available on our website. We are not including the information contained on our website as part of, or incorporating it by reference into, thisAnnual Report on Form 10-K.3ITEM 1A. RISK FACTORSYou should consider carefully the following risks when reading the information, including the financial information, contained in this Annual Report onForm 10-K.We operate in a highly competitive environment and face significant competition and price pressure.We operate in a highly competitive industry and compete with producers, manufacturers, distributors and sales agents offering products equivalent tosubstantially all of the products we offer. Competition is based on several key criteria, including product price, product performance, product quality, productavailability and security of supply, breadth of product offerings, geographic reach, responsiveness of product development in cooperation with customers,technical expertise and customer service. Many of our competitors are larger than we are and may have greater financial resources, more product offerings anda broader geographic reach. As a result, these competitors may be able to offer a broader array of products to a larger geographic area and may be better ablethan us to withstand changes in conditions within our industry, changes in the prices and availability of raw materials and changes in general economicconditions as well as be able to introduce innovative products that reduce demand for or the profit of our products. Additionally, competitors’ pricingdecisions could compel us to decrease our prices, which could adversely affect our margins and profitability. Our ability to maintain or increase ourprofitability would be dependent upon our ability to offset competitive decreases in the prices and margins of our products by improving productionefficiency, investing in infrastructure to reduce freight costs, identifying and selling higher margin products, providing higher levels of technical expertiseand customer service, and improving existing products through innovation and research and development. If we are unable to maintain our profitability orcompetitive position, we could lose market share to our competitors and experience reduced profitability.Fluctuations in the prices and availability of our raw materials, which may be cyclical in nature, could have a material adverse effect on our operationsand the margins we receive on sales of our products.We experience regular and recurring fluctuations in the pricing of our raw materials. Those fluctuations can be significant and occur rapidly. The cyclicalityof commodity markets, such as caustic soda, primarily results from changes in the balance between supply and demand and the level of general economicactivity. We cannot predict whether the markets for our raw materials will favorably impact or negatively impact the margins we can realize.Our principal chemical raw materials are generally purchased under supply contracts. The prices we pay under these contracts generally lag the market pricesof the underlying raw material and the cost of inventory we have on hand, particularly inventories of our bulk commodity chemicals where we havesignificant volumes stored at our facilities, generally will lag the current market pricing of such inventory. The pricing within our supply contracts generallyadjusts quarterly or monthly. While we attempt to maintain competitive pricing and stable margin dollars, the potential variance in our cost of inventory fromthe current market pricing can cause significant volatility in our margins realized. We do not engage in futures or other derivatives contracts to hedge againstfluctuations in future prices. We may enter into sales contracts where the selling prices for our products are fixed for a period of time, exposing us to volatilityin raw materials prices that we acquire on a spot market or short-term contractual basis. We attempt to pass commodity pricing changes to our customers, butwe may be unable to or be delayed in doing so. Our inability to pass through price increases or any limitation or delay in our passing through price increasescould adversely affect our profit margins.We are also dependent upon the availability of our raw materials. In the event that raw materials are in short supply or unavailable, raw material suppliers mayextend lead times or limit or cut off supplies. As a result, we may not be able to supply or manufacture products for some or all of our customers. Constraintson the supply or delivery of critical raw materials could disrupt our operations and adversely affect the performance of our businesses.Demand for our products is affected by general economic conditions and by the cyclical nature of many of the industries we serve, which could causesignificant fluctuations in our sales volumes and results.Demand for our products is affected by general economic conditions. A decline in general economic or business conditions in the industries served by ourcustomers could have a material adverse effect on our businesses. Although we sell to areas traditionally considered non-cyclical, such as water treatment,food products and health and nutritional ingredients, many of our customers are in businesses that are cyclical in nature, such as the industrial manufacturingand energy industries which include the ethanol and agriculture industries. Downturns in these industries could adversely affect our sales and our financialresults by affecting demand for and pricing of our products.4Changes in our customers’ needs or failure of our products to meet customers’ specifications could adversely affect our sales and profitability.Our products are used for a broad range of applications by our customers. Changes in our customers’ product needs or processes, or reductions in demand fortheir end products, may enable our customers to reduce or eliminate consumption of the products that we provide. Customers may also find alternativematerials or processes that no longer require our products. Consequently, it is important that we develop new products to replace the sales of products thatmature and decline in use.Our products provide important performance attributes to our customers’ products. If our products fail to meet the customers’ specifications, perform in amanner inconsistent with the customers’ expectations or have a shorter useful life than required, a customer could seek replacement of the product or damagesfor costs incurred as a result of the product failure. A successful claim or series of claims against us could have a material adverse effect on our financialcondition and results of operations and could result in a loss of one or more customers. Reductions in demand for our products could adversely affect oursales and financial results and result in facility closures.Our business is subject to hazards common to chemical businesses, any of which could interrupt our production and adversely affect our results ofoperations.Our business is subject to hazards common to chemical manufacturing, blending, storage, handling and transportation, including explosions, fires, severeweather, natural disasters, mechanical failure, unscheduled downtime, transportation interruptions, traffic accidents involving our delivery vehicles, chemicalspills, discharges or releases of toxic or hazardous substances or gases and other risks. These hazards could cause personal injury and loss of life, severedamage to or destruction of property and equipment, and environmental contamination. In addition, the occurrence of material operating problems at any ofour facilities due to any of these hazards may make it impossible for us to make sales to our customers and may result in a negative public or politicalreaction. Many of our facilities are near significant residential populations which increases the risk of negative public or political reaction should anenvironmental issue occur and could lead to adverse zoning or other regulatory actions that could limit our ability to operate our business in those locations.Accordingly, these hazards and their consequences could have a material adverse effect on our operations as a whole, including our results of operations andcash flows, both during and after the period of operational difficulties.We are highly dependent upon transportation infrastructure to ship and receive our products and delays in these shipments could adversely affect ourresults of operations.Although we maintain a number of owned trucks and trailers, we rely heavily upon transportation provided by third parties (including common carriers, bargecompanies, rail companies and trans-ocean cargo companies) to deliver products to us and to our customers. Our access to third-party transportation is notguaranteed, and we may be unable to transport our products in a timely manner, or at all, in certain circumstances, or at economically attractive rates.Disruptions in transportation are common, are often out of our control, and can happen suddenly and without warning. Rail limitations, such as limitations inrail capacity, availability of railcars and adverse weather conditions have disrupted or delayed rail shipments in the past and we expect they will continueinto the future. Barge shipments are delayed or impossible under certain circumstances, including during times of high or low water levels, when waterwaysare frozen and when locks and dams are inoperable. Truck transportation has been negatively impacted by a number of factors, including limited availabilityof qualified drivers and equipment, and limitations on drivers’ hours of service. The volumes handled by, and operating challenges at, ocean ports have attimes been volatile and can delay the receipt of goods, or cause the cost of shipping goods to be more expensive. Our failure to ship or receive products in atimely and efficient manner could have a material adverse effect on our financial condition and results of operations.Environmental, health and safety, transportation and storage laws and regulations cause us to incur substantial costs and may subject us to futureliabilities and risks.We are subject to numerous federal, state and local environmental, health and safety laws and regulations in the jurisdictions in which we operate, includingthe management, storage, transportation and disposal of chemicals and wastes; product regulation; air water and soil contamination; and the investigationand cleanup of any spills or releases that may result from our management, handling, storage, sale, or transportation of chemicals and other products. Thenature of our business exposes us to risks of liability under these laws and regulations. Ongoing compliance with such laws and regulations is an importantconsideration for us and we invest substantial capital and incur significant operating costs in our compliance efforts. In addition, societal concerns regardingthe safety of chemicals in commerce and their potential impact on the environment have resulted in a growing trend towards increasing levels of productsafety and environmental protection regulations. These concerns have led to, and could continue to result in, more stringent regulatory intervention bygovernmental authorities. In addition, these concerns could influence public5perceptions, impact the commercial viability of the products we sell and increase the costs to comply with increasingly complex regulations, which couldhave a negative impact on our business, financial condition and results of operations.In addition, we operate a fleet of more than 150 vehicles, primarily in our Water Treatment Group, which are highly regulated, including by the U.S.Department of Transportation (“DOT”). The DOT governs transportation matters including authorization to engage in motor carrier service, including thenecessary permits to conduct our businesses, equipment operation, and safety. We are audited periodically by the DOT to ensure that we are in compliancewith various safety, hours-of-service, and other rules and regulations. If we were found to be out of compliance, the DOT could severely restrict or otherwiseimpact our operations, which could have a material adverse effect on our operations as a whole, including our results of operations and cash flows.If we violate applicable laws or regulations, in addition to being required to correct such violations, we could be held liable in administrative, civil orcriminal proceedings for substantial fines and other sanctions that could disrupt, limit or halt our operations, which could have a material adverse effect onour operations as a whole, including our results of operations and cash flows. Liabilities associated with the investigation and cleanup of releases ofhazardous substances, as well as personal injury, property damages or natural resource damages arising out of such releases of hazardous substances, may beimposed in many situations without regard to violations of laws or regulations or other fault, and may also be imposed jointly and severally (so that aresponsible party may be held liable for more than its share of the losses involved, or even the entire loss). Such liabilities can be difficult to identify and theextent of any such liabilities can be difficult to predict. We use, and in the past have used, hazardous substances at many of our facilities, and have generated,and continue to generate, hazardous wastes at a number of our facilities. We have in the past been, and may in the future be, subject to claims relating toexposure to hazardous materials and the associated liabilities may be material.Environmental problems at any of our facilities could result in significant unexpected costs.We are subject to federal, state and local environmental regulations regarding the ownership of real property and the operations conducted on real property.Under various federal, state and local laws, ordinances and regulations, we may own or operate real property or may have arranged for the disposal ortreatment of hazardous or toxic substances at a property and, therefore, may become liable for the costs of removal or remediation of certain hazardoussubstances released on or in our property or disposed of by us, as well as certain other potential costs which could relate to hazardous or toxic substances(including governmental fines and injuries to persons and property). Such liability may be imposed whether or not we knew of, or were responsible for, thepresence of these hazardous or toxic substances. Further, future changes in environmental laws or regulations may require additional investment in capitalequipment or the implementation of additional compliance programs in the future. The cost of investigation, remediation or removal of such substances maybe substantial.In the conduct of our operations, we have handled and do handle materials that are considered hazardous, toxic or volatile under federal, state and local laws.The accidental release of such products cannot be completely eliminated. In addition, we operate or own facilities located on or near real property that wasformerly owned and operated by others. These properties may have been used in ways that involved hazardous materials. Contaminates may migrate from,within or through any such property, which may give rise to claims against us. Third parties who are responsible for contamination may not have funds, ormay not make funds available when needed, to pay remediation costs imposed upon us jointly with them under environmental laws and regulations.We are aware that soil and groundwater contamination exists on one of our facilities. The primary contaminate of concern is trichloroethylene. In fiscal 2018,we reserved $0.6 million for estimated expenses related to remediating this contamination, and adjusted this liability down by $0.1 million in fiscal 2019 as aresult of revised estimates. Given the many uncertainties involved in assessing environmental claims, our reserves may prove to be insufficient. Increases inthese estimated environmental expenses could have a material adverse effect on our business, financial condition and results of operations.Our food, pharmaceutical and nutritional products are subject to government regulation, both in the United States and abroad, which could increase ourcosts significantly and limit or prevent the sale of such products.The manufacture, packaging, labeling, advertising, promotion, distribution and sale of our food, pharmaceutical and nutritional products are subject toregulation by numerous national and local governmental agencies in the United States and other countries. The primary regulatory bodies in the UnitedStates are the Food and Drug Administration (the “FDA”), the United States Department of Agriculture and the Federal Trade Commission, and we are alsosubject to similar regulators in other countries. Failure to comply with these regulatory requirements may result in various types of penalties or fines. Theseinclude injunctions, product withdrawals, recalls, product seizures, fines and criminal prosecutions. Individual states also regulate dietary supplements. Astate may interpret claims or products presumptively valid under federal law as illegal under that state’s regulations. Approvals or licensing may beconditioned on reformulation of products or may be unavailable with respect to certain products or product ingredients. Any of6these government agencies, as well as legislative bodies, can change existing regulations, or impose new ones, or could take aggressive measures, causing orcontributing to a variety of negative consequences, including:•requirements for the reformulation of certain or all products to meet new standards,•the recall or discontinuance of certain or all products,•additional record-keeping requirements,•expanded documentation of the properties of certain or all products,•expanded or different labeling,•adverse event tracking and reporting, and•additional scientific substantiation.In particular, the FDA’s current good manufacturing practices (“GMPs”) describe policies and procedures designed to ensure that nutraceuticals,pharmaceuticals and dietary supplements are produced in a quality manner, do not contain contaminants or impurities, and are accurately labeled and coverthe manufacturing, packaging, labeling and storing of supplements, with requirements for quality control, design and construction of manufacturing plants,testing of ingredients and final products, record keeping, and complaints processes. Those who manufacture, package or store dietary supplements mustcomply with current GMPs. If we or our suppliers fail to comply with current GMPs, the FDA may take enforcement action against us or our suppliers.Any or all of the potential negative consequences described above could have a material adverse effect on us or substantially increase the cost of doingbusiness in this area. There can be no assurance that the regulatory environment in which we operate will not change or that such regulatory environment, orany specific action taken against us, will not result in a material adverse effect on us.Our businesses expose us to potential product liability claims and recalls, which could adversely affect our financial condition and performance.The repackaging, blending, mixing and distribution of products by us, including chemical products and products used in food or food ingredients or withmedical, pharmaceutical or dietary supplement applications, involve an inherent risk of exposure to product liability claims, product recalls, product seizuresand related adverse publicity, including, without limitation, claims for exposure to our products, spills or escape of our products, personal injuries, food-related claims and property damage or environmental claims. A product liability claim, judgment or recall against our customers could also result insubstantial and unexpected expenditures for us, affect consumer confidence in our products and divert management’s attention from other responsibilities.Although we maintain product liability insurance, there can be no assurance that the type or level of coverage is adequate or that we will be able to continueto maintain our existing insurance or obtain comparable insurance at a reasonable cost, if at all. A product recall or a partially or completely uninsuredjudgment against us could have a material adverse effect on our business, financial condition and results of operations.Demand for our food and nutritional products is highly dependent upon consumers’ perception of the safety and quality of our products, our customers’products as well as similar products distributed by other companies, and adverse publicity and negative public perception regarding particular ingredientsor products or the nutraceuticals industry in general could limit our ability to increase revenue and grow that portion of our business.Purchasing decisions made by consumers of products that contain our ingredients may be affected by adverse publicity or negative public perceptionregarding particular ingredients or products or the nutraceuticals industry in general. This negative public perception may include publicity regarding thelegality or quality of particular ingredients or products in general or of other companies or our products or ingredients specifically. Negative publicperception may also arise from regulatory investigations, regardless of whether those investigations involve us. We are highly dependent upon consumers’perception of the safety and quality of products that contain our ingredients as well as similar products distributed by other companies. Thus, the merepublication of reports asserting that such products may be harmful could have a material adverse effect on us, regardless of whether these reports arescientifically supported. Publicity related to dietary supplements may also result in increased regulatory scrutiny of our industry. Adverse publicity may havea material adverse effect on our business, financial condition, results of operations and cash flows. There can be no assurance of future favorable scientificresults and media attention or of the absence of unfavorable or inconsistent findings.7Our Water Treatment Group and our agricultural product sales within our Industrial Group are subject to seasonality and weather conditions, whichcould adversely affect our results of operations.Our Water Treatment Group has historically experienced higher sales during April to September, primarily due to a seasonal increase in chemicals used bymunicipal water treatment facilities. Our agricultural product sales within our Industrial Group are also seasonal, primarily corresponding with the plantingand harvesting seasons. Demand in both of these areas is also affected by weather conditions, as either higher or lower than normal precipitation ortemperatures may affect water usage and the timing and the amount of consumption of our products. We cannot assure you that seasonality or fluctuatingweather conditions will not have a material adverse effect on our results of operations.The insurance that we maintain may not fully cover all potential exposures.We maintain property, business interruption and casualty insurance, but such insurance may not cover all risks associated with the hazards of our businessesand is subject to limitations, including deductibles and limits on the liabilities covered. We may incur losses beyond the limits or outside the coverage of ourinsurance policies, including liabilities for environmental remediation and product liability. In addition, from time to time, various types of insurance forcompanies in the chemical or food and nutritional products industry have not been available on commercially acceptable terms or, in some cases, have notbeen available at all. In the future, we may not be able to obtain coverage at current levels, and our premiums may increase significantly on coverage that wemaintain.Failure to comply with the covenants under our credit facility may have a material adverse effect.We are party to a credit agreement (the “Credit Agreement”) with U.S. Bank National Association and other lenders (collectively, the “Lenders”), whichincludes secured revolving credit facilities (the “Revolving Loan Facility”) totaling $150.0 million. The Revolving Loan Facility includes a $5.0 millionletter of credit subfacility and $15.0 million swingline subfacility. As of March 31, 2019, we had $85.0 million outstanding under the Revolving LoanFacility. We may make payments on the Revolving Loan Facility from time to time. If we are unable to generate sufficient cash flow or otherwise obtain fundsnecessary to make payments on our credit facilities, we could be in default when the facilities become due in 2023. We are also required to comply withseveral financial covenants under the Credit Agreement. Our ability to comply with these financial covenants may be affected by events beyond our control,which could result in a default under the Credit Agreement; such default may have a material adverse effect on our business, financial condition, operatingresults or cash flows.The Credit Agreement also contains other customary affirmative and negative covenants, including covenants that restrict our ability to incur additionalindebtedness, dispose of significant assets, make certain investments, including any acquisitions other than permitted acquisitions, make certain payments,enter into sale and leaseback transactions, grant liens on its assets or rate management transactions, subject to certain limitations. These restrictions mayadversely affect our business.Impairment to the carrying value of our goodwill or other intangible assets could adversely affect our financial condition and consolidated results ofoperations.Goodwill represents the excess of the cost of acquired businesses over the fair value of identifiable tangible net assets and identifiable intangible assetspurchased. Goodwill is tested at least annually for impairment, and is tested for impairment more frequently if events or changes in circumstances indicatethat the asset might be impaired. Our annual test for impairment is as of the first day of our fourth fiscal quarter, or December 31, 2018 for fiscal 2019.Goodwill impairment testing is at the reporting unit level. For our Water Treatment reporting unit, we performed an analysis of qualitative factors todetermine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If that qualitative analysis indicates that animpairment may exist, then we would calculate the amount of the impairment by comparing the fair value of the assets and liabilities to the fair value of thereporting unit. For our Industrial and Health and Nutrition reporting units, we performed a quantitative goodwill impairment analysis, which required us toestimate the fair value of these reporting units and compare the fair value to the reporting unit’s carrying value. The fair value of the reporting unit in excessof the value of the assets and liabilities is the implied fair value of the goodwill. If this amount is less than the carrying amount of goodwill, impairment isrecognized for the difference. As of December 31, 2018, the fair value of our Industrial and Health and Nutrition reporting units exceeded their carryingvalues, and thus no impairment was recorded. In fiscal 2018, however, we recorded an impairment charge in our Health and Nutrition reporting unit of $39.1million. A significant amount of judgment is involved in determining if an indication of impairment exists. Factors may include, among others: a significantdecline in our expected future cash flows; a sustained, significant decline in our stock price and market capitalization; a significant adverse change in thebusiness climate; unanticipated competition; and slower growth rates. An adverse change in these factors may have a significant impact on the recoverabilityof the net assets recorded, and any8resulting impairment charge in the future could have a material adverse effect on our financial condition and consolidated results of operations.We evaluate the useful lives of our intangible assets to determine if they are definite- or indefinite-lived. Reaching a determination on useful life requiressignificant judgments and assumptions regarding the future effects of obsolescence, demand, competition, other economic factors (such as the stability of theindustry, legislative action that results in an uncertain or changing regulatory environment, and expected changes in distribution channels), and the expectedlives of other related groups of assets. We cannot accurately predict the amount and timing of any impairment of goodwill and other intangible assets. Should the value of these assets becomeimpaired, there could be a material adverse effect on our financial condition and consolidated results of operations.If we are unable to retain key personnel or attract new skilled personnel, it could have an adverse impact on our businesses.Because of the specialized and technical nature of our businesses, our future performance is dependent on the continued service of, and on our ability toattract and retain, qualified management, scientific, technical and support personnel. The unanticipated departure of key members of our management teamcould have an adverse impact on our business.We may not be able to successfully consummate future acquisitions or dispositions or integrate acquisitions into our business, which could result inunanticipated expenses and losses.As part of our business growth strategy, we have acquired businesses and may pursue acquisitions in the future. Our ability to pursue this strategy will belimited by our ability to identify appropriate acquisition candidates and our financial resources, including available cash and borrowing capacity. Inaddition, we may seek to divest of businesses that are underperforming or not core to our future business. The expense incurred in consummatingtransactions, the time it takes to integrate an acquisition or our failure to integrate businesses successfully could result in unanticipated expenses and losses.Furthermore, we may not be able to realize the anticipated benefits from acquisitions.The process of integrating acquired operations into our existing operations may result in unforeseen operating difficulties and may require significantfinancial resources that would otherwise be available for the ongoing development or expansion of existing operations. The risks associated with theintegration of acquisitions include potential disruption of our ongoing businesses and distraction of management, unforeseen claims, liabilities, adjustments,charges and write-offs, difficulty in conforming the acquired business’ standards, processes, procedures and controls with our operations, and challengesarising from the increased scope, geographic diversity and complexity of the expanded operations.Our businesses are subject to risks stemming from natural disasters or other extraordinary events outside of our control, which could interrupt ourproduction and adversely affect our results of operations.Natural disasters have the potential of interrupting our operations and damaging our properties, which could adversely affect our businesses. Flooding of theMississippi River has temporarily shifted the Company’s terminal operations out of its buildings four times since the spring of 2010, including most recentlythe spring of 2019. We can give no assurance that flooding or other natural disasters will not recur or that there will not be material damage or interruption toour operations in the future from such disasters.Chemical-related assets may be at greater risk of future terrorist attacks than other possible targets in the United States. Federal law imposes site securityrequirements, specifically on chemical facilities, which have increased our overhead expenses. Federal regulations have also been adopted to increase thesecurity of the transportation of hazardous chemicals in the United States. We ship and receive materials that are classified as hazardous and we believe wehave met these requirements, but additional federal and local regulations that limit the distribution of hazardous materials are being considered. Bans onmovement of hazardous materials through certain cities could adversely affect the efficiency of our logistical operations. Broader restrictions on hazardousmaterial movements could lead to additional investment and could change where and what products we provide.The occurrence of extraordinary events, including future terrorist attacks and the outbreak or escalation of hostilities, cannot be predicted, but theiroccurrence can be expected to negatively affect the economy in general, and specifically the markets for our products. The resulting damage from a directattack on our assets, or assets used by us, could include loss of life and property damage. In addition, available insurance coverage may not be sufficient tocover all of the damage incurred or, if available, may be prohibitively expensive.9We may not be able to renew our leases of land where four of our operations facilities reside.We lease the land where our three main terminals are located and where another significant manufacturing plant is located. Our current leases, including allrenewal periods, extend out to 2023, 2033, 2029 and 2044. The failure to secure extended lease terms on any one of these facilities may have a materialadverse impact on our business, as they are where a portion of our chemicals are manufactured and where the majority of our bulk chemicals are stored. Whilewe can make no assurances, based on historical experience and anticipated future needs, we intend to extend these leases and believe that we will be able torenew our leases as the renewal periods expire. If we are unable to renew three of our leases (two relate to terminals and one to manufacturing) any propertyremaining on the land becomes the property of the lessor, and the lessor has the option to either maintain the property or remove the property at our expense.The fourth lease provides that we turn any property remaining on the land over to the lessor for them to maintain or remove at their expense. The cost torelocate our operations could have a material adverse effect on our results of operations and financial condition.ITEM 1B. UNRESOLVED STAFF COMMENTSNone. 10ITEM 2. PROPERTIESOur corporate offices are located in Roseville, Minnesota, where we leased approximately 40,000 square feet with an initial term through December 31, 2021,as of March 31, 2019. In the first quarter of fiscal 2020, we purchased the entire building which has a total of approximately 50,000 square feet. We also ownour principal manufacturing, warehousing, and distribution location in Minneapolis, Minnesota, which consists of approximately 11 acres of land, with sixbuildings containing a total of 177,000 square feet of office and warehouse space primarily used by our Industrial Group. We believe that we carry customarylevels of insurance covering the replacement of damaged property.In addition to those facilities, our other facilities material to our operations include our manufacturing locations and large warehouse and distributionfacilities described below. We believe that these facilities, together with those described above, are adequate and suitable for the purposes they serve. Unlessnoted, each facility is owned by us and is primarily used as office and warehouse space. GroupLocation Approx.Square Feet Health and NutritionFullerton, CA (1) 55,800 Florida, NY (2) 107,000 IndustrialCamanche, IA 95,000 Centralia, IL (3) 77,000 Dupo, IL (4) 64,000 St. Paul, MN (5) 32,000 Rosemount, MN (6) 63,000 Industrial and Water TreatmentSt. Paul, MN (7) 59,000 Memphis, TN 41,000 Water TreatmentApopka, FL 32,100(1)This is a leased facility comprising administrative offices and a distribution facility. The lease runs through January 2026.(2)This is comprised of a 79,000 square foot manufacturing plant which sits on approximately 16 acres, as well as a leased 28,000 square foot warehouselocated in close proximity that is leased until December 2020.(3)This manufacturing facility includes 10 acres of land owned by the Company.(4)The land for this manufacturing and packaging facility is leased from a third party, with the lease expiring in May 2023.(5)Our terminal operations, located at two sites on opposite sides of the Mississippi River, are made up of three buildings, outside storage tanks for thestorage of liquid bulk chemicals, including caustic soda, as well as numerous smaller tanks for storing and mixing chemicals. The land is leased fromthe Port Authority of the City of St. Paul, Minnesota. One of the applicable leases runs through 2033, while the other one runs through 2044 includingall available lease extensions.(6)This facility includes 28 acres of land owned by the Company. This manufacturing facility has outside storage tanks for the storage of bulk chemicals,as well as numerous smaller tanks for storing and mixing chemicals.(7)Our Red Rock facility, which consists of a 59,000 square-foot building located on approximately 10 acres of land, has outside storage capacity forliquid bulk chemicals, as well as numerous smaller tanks for storing and mixing chemicals. The land is leased from the Port Authority of the City of St.Paul, Minnesota and runs until 2029.ITEM 3. LEGAL PROCEEDINGSThere are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which we or any of our subsidiaries are aparty or of which any of our property is the subject.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.11PART II ITEM 5. MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITYSECURITIES Our common stock is listed on the Nasdaq Global Select Market under the symbol “HWKN.” As of May 17, 2019, shares of our common stock were held byapproximately 396 shareholders of record.On May 29, 2014, our Board of Directors authorized the repurchase of up to 300,000 shares of our outstanding common stock. On February 7, 2019, ourBoard of Directors increased the authorization to up to 800,000 shares. The shares may be repurchased on the open market or in privately negotiatedtransactions subject to applicable securities laws and regulations. The following table sets forth information concerning purchases of our common stock forthree months ended March 31, 2019:PeriodTotal Number of SharesPurchased Average Price Paid PerShareTotal Number of SharesPurchased as Part of PubliclyAnnounced Plans or ProgramsMaximum Number of Sharesthat May Yet be Purchasedunder the Plans or Programs12/31/2018-1/27/2019— ——52,7581/28/2019-2/24/2019 (1)39,382 $40.6039,382513,3762/28/2019-3/31/20198,996 $40.948,996504,380 Total48,378 48,378 (1) - The ending balance in this row reflects the additional 500,000 shares that were authorized by our Board of Directors in the fourth quarter of fiscal 2019.The following graph compares the cumulative total shareholder return on our common shares with the cumulative total returns of the Nasdaq Industrial Index,the Nasdaq Composite Index, the Russell 2000 Index and the Standard & Poor’s (“S&P”) Small Cap 600 Index for our last five completed fiscal years. Thegraph assumes the investment of $100 in our stock and each of those indices on March 30, 2014, and reinvestment of all dividends.1213ITEM 6. SELECTED FINANCIAL DATASelected financial data for the Company is presented in the table below and should be read in conjunction with Management’s Discussion and Analysis ofFinancial Condition and Results of Operations included in Item 7 and the Company’s Financial Statements and Notes to Financial Statements included inItem 8 of this Annual Report on Form 10-K. Fiscal Year 2019 2018 (1) 2017 2016 2015 (In thousands, except per share data)Sales $556,326 $504,169 $483,593 $413,976 $364,023 Gross profit 95,936 86,760 98,073 80,257 65,791 Net income (loss) 24,433 (9,177) 22,555 18,143 19,214 Basic earnings (loss) per common share 2.29 (0.87) 2.14 1.72 1.82 Diluted earnings (loss) per common share 2.28 (0.86) 2.13 1.72 1.81 Cash dividends declared per common share 0.68 0.88 0.84 0.80 0.76 Cash dividends paid per common share 1.12 0.86 0.82 0.78 0.74 Total assets $385,599 $390,991 $418,584 $436,491 $248,462 Total long-term obligations (2) 90,316 96,646 100,968 130,407 6,589 (1) - Net loss and basic and diluted loss per share for fiscal 2018 include a goodwill impairment charge of $39.1 million, or $3.68 per diluted share, related to our Health &Nutrition reporting unit and a one-time tax benefit of $13.9 million, or $1.31 per diluted share, related to the revaluation of our net deferred tax liabilities associated with the changein the U.S. corporate tax rate from 35% to 21% effective January 1, 2018 due to the Tax Cuts and Jobs Act of 2017.(2) - Total long-term obligations includes bank debt payable, as per the terms of the then-existing credit agreement, later than 12 months after the balance sheet date as well asobligations payable under the terms of our withdrawal from a multi-employer pension plan.ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following is a discussion and analysis of our financial condition and results of operations for fiscal 2019, 2018 and 2017. This discussion should be readin conjunction with the consolidated Financial Statements and Notes to Consolidated Financial Statements included in Item 8 of this Annual Report onForm 10-K.OverviewWe derive substantially all of our revenues from the sale of chemicals and specialty ingredients to our customers in a wide variety of industries. We began ouroperations primarily as a distributor of bulk chemicals with a strong customer focus. Over the years, we have maintained the strong customer focus and haveexpanded our business by increasing our sales of value-added chemical products and specialty ingredients, including manufacturing, blending andrepackaging certain products.Share Repurchase ProgramOur Board of Directors has authorized the repurchase of up to 800,000 shares of our outstanding common stock, including an increase of 500,000 shares inFebruary 2019. The shares may be repurchased on the open market or in privately negotiated transactions subject to applicable securities laws andregulations. The primary objective of the share repurchase program is to offset the impact of dilution from issuances relating to employee and director equitygrants and our employee stock purchase program. During fiscal 2019, we repurchased 108,166 shares of common stock with an aggregate purchase price of$4.4 million. No shares were repurchased during fiscal 2018 or 2017. As of March 31, 2019, 504,380 shares remained available for purchase under theprogram.14Financial OverviewAn overview of our financial performance in fiscal 2019 is provided below:• Sales of $556.3 million, a 10.3% increase from fiscal 2018;•Gross profit of $95.9 million, an increase of $9.2 million, or 10.6% from fiscal 2018;•Selling, general and administrative (“SG&A”) expenses decreased by $0.3 million year over year, and down 1.2% as a percentage of sales from fiscal2018; •Net cash provided by operating activities of $48.0 million as compared to $27.3 million for fiscal 2018.We focus on total profitability dollars when evaluating our financial results as opposed to profitability as a percentage of sales, as sales dollars tend tofluctuate, particularly in our Industrial and Water Treatment segments, as raw material prices rise and fall. The costs for certain of our raw materials can rise orfall rapidly, causing fluctuations in gross profit as a percentage of sales.We use the last in, first out (“LIFO”) method of valuing the majority of our inventory in our Industrial and Water Treatment segments, which causes the mostrecent product costs to be recognized in our income statement. The valuation of LIFO inventory for interim periods is based on our estimates of fiscal year-end inventory levels and costs. The LIFO inventory valuation method and the resulting cost of sales are consistent with our business practices of pricing tocurrent chemical raw material prices. Inventories in our Health and Nutrition segment are valued using the first-in, first-out (“FIFO”) method.We disclose the sales of our bulk commodity products as a percentage of total sales dollars for our Industrial and Water Treatment segments. Our definition ofbulk commodity products includes products that we do not modify in any way, but receive, store, and ship from our facilities, or direct ship to our customersin large quantities. We review our sales reporting on a periodic basis to ensure we are including all products that meet this definition. The disclosures in thisdocument referring to sales of bulk commodity products have been updated for all periods presented based on the most recent review.Results of OperationsThe following table sets forth certain items from our statement of income as a percentage of sales from period to period: Fiscal 2019 Fiscal 2018 Fiscal 2017Sales 100.0 % 100.0 % 100.0 %Cost of sales (82.8)% (82.8)% (79.7)%Gross profit 17.2 % 17.2 % 20.3 %Selling, general and administrative expenses (10.6)% (11.8)% (12.3)%Goodwill impairment — % (7.8)% — %Operating income (loss) 6.6 % (2.3)% 8.0 %Interest expense, net (0.6)% (0.7)% (0.4)%Other income — % — % — %Income (loss) before income taxes 6.0 % (3.0)% 7.6 %Income tax provision (1.6)% 1.2 % (2.8)%Net income (loss) 4.4 % (1.8)% 4.7 %Fiscal 2019 Compared to Fiscal 2018SalesSales increased $52.2 million, or 10.3%, to $556.3 million for fiscal 2019, as compared to sales of $504.2 million for fiscal 2018. Sales increased year overyear in all segments.15Industrial Segment. Industrial segment sales increased $34.5 million, or 13.9%, to $281.9 million for fiscal 2019. Sales of bulk commodity products in theIndustrial segment were approximately 22% of sales dollars in fiscal 2019 and 20% in fiscal 2018. Sales dollars increased in fiscal 2019 due to increasedvolumes, particularly of certain specialty products that carry higher per-unit selling prices, as well as increased selling prices on certain products resultingfrom increased raw material costs.Water Treatment Segment. Water Treatment segment sales increased $11.0 million, or 8.0%, to $149.5 million for fiscal 2019. Sales of bulk commodityproducts in the Water Treatment segment were approximately 15% of sales dollars in both fiscal 2019 and 2018. Sales dollars increased in fiscal 2019 as aresult of increased sales volumes across many product lines as well as a favorable product mix shift.Health and Nutrition Segment. Sales for our Health and Nutrition segment increased $6.6 million, or 5.6%, to $125.0 million for fiscal 2019. Increased salesof distributed specialty products drove the year-over-year increase in sales.Gross ProfitGross profit was $95.9 million, or 17.2% of sales, for fiscal 2019, an increase of $9.2 million from $86.8 million, or 17.2% of sales, for fiscal 2018. Duringfiscal 2019, the LIFO reserve decreased, and gross profits increased, by $0.5 million. Conversely, during fiscal 2018, the LIFO reserve increased, and grossprofits decreased, by $4.1 million. In addition to this $4.6 million year-over-year positive impact, the increase in gross profit during fiscal 2019 was a resultof increased sales across all three segments, somewhat offset by increased operating costs.Industrial Segment. Gross profit for the Industrial segment was $34.9 million, or 12.4% of sales, for fiscal 2019, an increase of $5.3 million from $29.6million, or 12.0% of sales, for fiscal 2018. During fiscal 2019, the LIFO reserve decreased, and gross profits increased, by $0.8 million. Conversely, duringfiscal 2018, the LIFO reserve increased, and gross profits decreased, by $3.3 million. In addition to this $4.1 million positive year-over-year impact, theincrease in gross profit dollars was due to a favorable product mix shift to more products with higher per-unit margins as well as improved pricing on certainproducts, offset somewhat by an increase in operational overhead costs driven largely by repair and maintenance costs, as well as increased transportationcosts due to a tight carrier market and increased fuel costs.Water Treatment Segment. Gross profit for the Water Treatment segment increased $1.7 million, or 4.7%, to $38.0 million, or 25.4% of sales, for fiscal 2019,as compared to $36.3 million, or 26.2% of sales, for fiscal 2018. The increase in gross profit was largely a result of higher sales volumes compared to a yearago, offset in part by an increase in certain variable costs, including variable pay, as well as higher transportation costs, primarily due to rising fuel costs.During fiscal 2019, the LIFO reserve increased, and gross profits decreased, by $0.3 million. Conversely, during fiscal 2018, the LIFO reserve increased, andgross profits decreased, by $0.8 million.Health and Nutrition Segment. Gross profit for our Health and Nutrition segment increased $2.2 million, or 10.4%, to $23.1 million, or 18.4% of sales, forfiscal 2019, as compared to $20.9 million, or 17.6% of sales, for fiscal 2018. Gross profit increased as a result of the combined impact of higher sales andlower operating costs compared to the same period a year ago.Selling, General and Administrative ExpensesSG&A expenses were $59.1 million, or 10.6% of sales, for fiscal 2019, and $59.4 million, or 11.8% of sales, for fiscal 2018. The decrease in SG&A expensesresulted from actions taken by management in the prior year, offset somewhat by increased variable pay expense. SG&A expense as a percentage of sales wasfavorable year over year in all three reporting segments.Operating Income (Loss)Operating income was $36.8 million, or 6.6% of sales, for fiscal 2019, as compared to an operating loss of $11.8 million, or (2.3)% of sales, for fiscal 2018due to the combined impact of the factors discussed above.Interest Expense, NetInterest expense was $3.4 million in both fiscal 2019 and 2018. The impact from higher interest rates in fiscal 2019 was offset by a nearly $20 millionreduction in average borrowings.16Income Tax ProvisionOur effective tax rate was 27.1% for fiscal 2019 and 39.1% for fiscal 2018. Our effective tax rate for fiscal 2018 was impacted by a $13.9 million one-timeincome tax benefit which was recognized as a result of the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Act”). Our effective tax rate for fiscal 2018 was alsoimpacted by the $39.1 million goodwill impairment charge which was recorded for book purposes but was not deductible for tax purposes.Fiscal 2018 Compared to Fiscal 2017SalesSales increased $20.6 million, or 4.3%, to $504.2 million for fiscal 2018, as compared to sales of $483.6 million for fiscal 2017. Sales increased year overyear in all segments.Industrial Segment. Industrial segment sales increased $8.8 million, or 3.7%, to $247.4 million for fiscal 2018. Sales of bulk commodity products in theIndustrial segment were approximately 20% of sales dollars in fiscal 2018 and 19% in fiscal 2017. Overall sales volumes decreased slightly, while salesdollars increased as a result of more sales of certain specialty products with higher per-unit selling prices, as well as higher selling prices on certain productsresulting from increased costs on one of our major commodities.Water Treatment Segment. Water Treatment segment sales increased $9.5 million, or 7.4%, to $138.5 million for fiscal 2018. Sales of bulk commodityproducts in the Water Treatment segment were approximately 15% of sales dollars in both fiscal 2018 and 2017. Sales dollars increased as a result ofincreased sales across many product lines.Health and Nutrition Segment. Sales for our Health and Nutrition segment increased $2.2 million, or 1.9%, to $118.3 million for fiscal 2018. Increased salesof distributed products more than offset decreased sales of our manufactured products. The decline in sales of our manufactured products was due to reduceddemand from certain customers and refocused efforts as we made investments to upgrade the facility.Gross ProfitGross profit was $86.8 million, or 17.2% of sales, for fiscal 2018, a decrease of $11.3 million from $98.1 million, or 20.3% of sales, for fiscal 2017. As a resultof raw material price increases and increases in year-end inventory levels of certain products, the LIFO reserve increased, and gross profits decreased, by $4.1million during fiscal 2018. During fiscal 2017, a reduction in inventory costs per unit and lower volumes of certain inventory on hand resulted in a decreaseto the LIFO reserve, and an increase in gross profits, of $2.7 million. In addition to this $6.8 million year-over-year negative impact, the decrease in grossprofit during fiscal 2018 was due to planned increases in personnel and other investments to drive future growth, including accelerated depreciation of $0.7million, a $0.6 million environmental liability charge associated with trichloroethylene contamination at our Minneapolis facility, as well as a $0.5 millionreclassification from SG&A expenses, product mix changes and continued competitive pricing pressures.Industrial Segment. Gross profit for the Industrial segment was $29.6 million, or 12.0% of sales, for fiscal 2018, a decrease of $9.3 million from $38.9million, or 16.3% of sales, for fiscal 2017. As a result of raw material price increases and increases in year-end inventory levels of certain products, the LIFOreserve increased, and gross profits decreased, by $3.3 million during fiscal 2018. During fiscal 2017, a reduction in inventory costs per unit and lowervolumes of certain inventory on hand resulted in a decrease to the LIFO reserve, and an increase in gross profits, of $2.0 million. In addition to this $5.3million negative year-over-year impact, the decrease in gross profit and gross profit as a percentage of sales was driven by increased operating costs as weinvested for future growth and to comply with increased regulatory requirements, a $0.6 million environmental liability charge associated withtrichloroethylene contamination at our Minneapolis facility, as well as lower margins on certain commodity products with rising material costs, driven bycompetitive pricing pressures. The impact was offset somewhat by higher profits on sales of certain specialty products with higher per-unit margins.Water Treatment Segment. Gross profit for the Water Treatment segment increased $0.3 million to $36.3 million, or 26.2% of sales, for fiscal 2018, ascompared to $36.0 million, or 27.9% of sales, for fiscal 2017. As a result of raw material price increases and increases in year-end inventory levels of certainproducts, the LIFO reserve increased, and gross profits decreased, by $0.8 million during fiscal 2018. During fiscal 2017, a reduction in inventory costs perunit and lower volumes of certain inventory on hand resulted in a decrease to the LIFO reserve, and an increase in gross profits, of $0.7 million. In spite of the$1.5 million negative year-over-year LIFO impact, gross profit increased as a result of increased sales volumes compared to a year ago. Gross profit as17a percentage of sales decreased compared to a year ago due to the negative year-over-year LIFO impact as well as a product mix shift.Health and Nutrition Segment. Gross profit for our Health and Nutrition segment decreased $2.4 million to $20.9 million, or 17.6% of sales, for fiscal 2018,as compared to $23.2 million, or 20.0% of sales, for fiscal 2017. Decreased sales of our manufactured products, which carry higher per-unit margins, was theprimary cause of the decline in gross profit and gross profit as a percentage of sales. The decrease in gross profit and gross profit as a percentage of sales wasalso driven by planned cost increases including accelerated depreciation expense of $0.7 million related to manufacturing equipment that we removed tomake upgrades to current equipment and to make room for more efficient equipment, as well as the reclassification of $0.5 million of costs that were recordedas SG&A expenses in the prior year to operating overhead in the current year to conform to our presentation.Selling, General and Administrative ExpensesSG&A expenses were $59.4 million, or 11.8% of sales, for fiscal 2018, and $59.4 million, or 12.3% of sales, for fiscal 2017. SG&A costs were positivelyimpacted in all segments as a result of management efforts to control costs, including delaying or suspending the filling of open positions as well as a declinein certain other variable expenses, resulting in a decline in SG&A costs in our Industrial and Water Treatment segments. However, SG&A costs in our Healthand Nutrition segment increased $1.0 million year over year, in spite of the reclassification of $0.5 million of expenses from SG&A to operating overhead toconform to our presentation, largely as a result of bad debt expense recorded due to a customer bankruptcy as well as severance expense.Goodwill ImpairmentIn fiscal 2018, we recorded a $39.1 million impairment of goodwill relating to our Health and Nutrition segment. The impairment charge was a result ofchanges in expectations for future growth as part of our fourth quarter long-term strategic planning process to align with historical experience in recentperiods and expected changes in future product mix.Operating Income (Loss)Operating loss was $11.8 million, or (2.3)% of sales, for fiscal 2018, as compared to operating income of $38.7 million, or 8.0% of sales, for fiscal 2017 due tothe combined impact of the factors discussed above.Interest Expense, NetInterest expense increased by $0.8 million to $3.4 million in fiscal 2018 compared to $2.6 million for fiscal 2017, due primarily to higher interest rates infiscal 2018 as compared to fiscal 2017.Income Tax ProvisionThe Tax Act lowered the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. Because our fiscal 2018 ended April 1, 2018, our tax provisionfor the current year was calculated utilizing a blended statutory federal rate of 31.5%. In future years, we expect our statutory federal rate to be 21%. UnderGAAP, deferred tax assets and liabilities are required to be revalued during the period in which the new tax legislation is enacted. As such, during the fiscalyear-end ended April 1, 2018 we revalued our net deferred tax liabilities to reflect the impact of the Tax Act and recorded a one-time benefit of $13.9 million.Our effective tax rate for fiscal 2018 was also impacted by the $39.1 million goodwill impairment charge which was recorded for book purposes but was notdeductible for tax purposes. Our effective income tax rate was 39.1% for fiscal 2018 compared to 37.4% for fiscal 2017.Liquidity and Capital ResourcesCash provided by operating activities in fiscal 2019 was $48.0 million compared to $27.3 million in fiscal 2018 and $44.9 million in fiscal 2017. Theincrease in cash provided by operating activities in fiscal 2019 as compared to fiscal 2018 was driven by an improvement in operating income as well asmore favorable year-over-year changes in certain components of working capital, in particular lower cash used for accounts receivable and inventory. Thedecrease in cash provided by operating activities in fiscal 2018 as compared to fiscal 2017 was conversely driven by lower operating income and unfavorableyear-over-year changes in accounts receivables and inventory. The large increase in inventory during fiscal 2018 was primarily due to increases in on-handand in-transit inventory, along with an increase in the per-unit cost of one of our major commodities. The decision to increase inventory was driven largelyby expectations of future cost increases. Due to the nature of our operations, which includes purchases18of large quantities of bulk chemicals, the timing of purchases can result in significant changes in working capital and the resulting operating cash flow.Historically, our cash requirements for working capital increase during the period from April through November as caustic soda inventory levels increase asmost of our barges are received during this period.Cash used in investing activities was $12.3 million in fiscal 2019 compared to $19.3 million in fiscal 2018 and $23.5 million in fiscal 2017. Capitalexpenditures were $12.6 million in fiscal 2019, $19.7 million in fiscal 2018 and $21.6 million in fiscal 2017. Capital expenditures in fiscal 2019 included$8.2 million related to facility improvements, replacement equipment, new and replacement containers and Water Treatment trucks, and $2.1 million relatedto business expansion, inventory storage and process improvements. Total capital spending in fiscal 2020 is currently expected to be $25 to $28 million,higher than the fiscal 2019 spending levels which were lower than average, due in part to the purchase of our corporate headquarters in early fiscal 2020, aplanned Water Treatment branch expansion and the purchase of a branch facility that is currently being leased, and increased production capabilities.Cash used in financing activities was $31.4 million in fiscal 2019, as compared to cash used in financing activities of $9.9 million in fiscal 2018 and cashused in financing activities of $34.5 million in fiscal 2017. Cash used in financing activities included net debt payments of $16.0 million in fiscal 2019. Infiscal 2018, we made net debt repayments of $2.1 million and in fiscal 2017 we made net debt repayments of $26.6 million. We also paid out cash dividendsof $12.0 million in fiscal 2019, $9.2 million in fiscal 2018 and $8.7 million in fiscal 2017. In fiscal 2019 we used $4.4 million to repurchase shares under ourboard-authorized share repurchase program. We did not repurchase any shares under the program in fiscal 2018 or 2017.Our cash balance was $9.2 million at March 31, 2019, an increase of $4.2 million as compared with April 1, 2018. Cash flows generated by operations duringfiscal 2019 were largely offset by debt repayments, capital expenditures and dividend payments.We were party to a credit agreement (the “Prior Credit Agreement”) with U.S. Bank National Association (“U.S. Bank”) as Sole Lead Arranger and Sole BookRunner and other lenders from time to time party thereto (collectively, the “Prior Lenders”), whereby U.S. Bank was also serving as Administrative Agent.The Prior Credit Agreement provided us with senior secured credit facilities totaling $165.0 million, consisting of a $100.0 million senior secured term loancredit facility and a $65.0 million senior secured revolving loan credit facility. The term loan facility required mandatory quarterly repayments, with thebalance due at maturity. The revolving loan facility included a letter of credit subfacility in the amount of $5.0 million and a swingline subfacility in theamount of $8.0 million. The Prior Credit Agreement was scheduled to terminate on December 23, 2020 and the underlying credit facility was secured bysubstantially all of our personal property assets and those of our subsidiaries. Borrowings under the Prior Credit Agreement bore interest at a variable rate perannum equal to one of the following, plus, in both cases, an applicable margin based upon our leverage ratio: (a) LIBOR for an interest period of one, two,three or six months as selected by us, reset at the end of the selected interest period, or (b) a base rate determined by reference to the highest of (1) U.S. Bank’sprime rate, (2) the Federal Funds Effective Rate plus 0.5%, or (3) one-month LIBOR for U.S. dollars plus 1.0%. The LIBOR margin was 1.125%, 1.25% or1.5%, depending on our leverage ratio. The base rate margin was either 0.125%, 0.25% or 0.5%, depending on our leverage ratio.On November 30, 2018, we entered into an amended and restated credit agreement (the “Credit Agreement”) with U.S. Bank as Sole Lead Arranger and SoleBook Runner, and other lenders from time to time party thereto (collectively, the “Lenders”), whereby U.S. Bank is also serving as Administrative Agent. TheCredit Agreement refinanced the term and revolving loans under the Prior Credit Agreement and provides us with senior secured revolving credit facilities(the “Revolving Loan Facility”) totaling $150.0 million. The Revolving Loan Facility includes a $5.0 million letter of credit subfacility and $15.0 millionswingline subfacility. The Revolving Loan Facility has a five-year maturity date, maturing on November 30, 2023. The Revolving Loan Facility is securedby substantially all of our personal property assets and those of our subsidiaries.We used $91.0 million of the proceeds from the Revolving Loan Facility to refinance the obligations under the Prior Credit Agreement. We may use theremaining amount of the Revolving Loan Facility for working capital, capital expenditures, share repurchases, restricted payments and acquisitions permittedunder the Credit Agreement, and other general corporate purposes.Borrowings under the Revolving Loan Facility bear interest at a rate per annum equal to one of the following, plus, in both cases, an applicable margin basedupon our leverage ratio: (a) LIBOR for an interest period of one, two, three or six months as selected by us, reset at the end of the selected interest period, or(b) a base rate determined by reference to the highest of (1) U. S. Bank’s prime rate, (2) the Federal Funds Effective Rate plus 0.5%, or (3) one-month LIBORfor U.S. dollars plus 1.0%. The LIBOR margin is between 0.85% and 1.35%, depending on our leverage ratio. The base rate margin is between0.00% and 0.35%, depending on our leverage ratio. At March 31, 2019, the effective interest rate on our borrowings was 3.2%.In addition to paying interest on the outstanding principal under the Revolving Loan Facility, we are required to pay a commitment fee on the unutilizedcommitments thereunder. The commitment fee is between 0.15% and 0.25%, depending on our leverage ratio.19Debt issuance costs of $0.2 million paid to the lenders in connection with the Credit Agreement, as well as unamortized debt issuance costs of $0.3 millionpaid in connection with the Prior Credit Agreement, are reflected as a reduction of debt and will be amortized as interest expense over the term of theRevolving Loan Facility.The Credit Agreement requires us to maintain (a) a minimum fixed charge coverage ratio of 1.15 to 1.00 and (b) a maximum total cash flow leverage ratio of3.0 to 1.0. The Credit Agreement also contains other customary affirmative and negative covenants, including covenants that restrict our ability to incuradditional indebtedness, dispose of significant assets, make certain investments, including any acquisitions other than permitted acquisitions, make certainpayments, enter into sale and leaseback transactions, grant liens on our assets or rate management transactions, subject to certain limitations. We arepermitted to make distributions, pay dividends and repurchase shares so long as no default or event of default exists or would exist as a result thereof.The Credit Agreement contains customary events of default, including failure to comply with covenants in the Credit Agreement and other loan documents,cross default to other material indebtedness, failure by us to pay or discharge material judgments, bankruptcy, and change of control. The occurrence of anevent of default would permit the lenders to terminate their commitments and accelerate loans under the Credit Facility.As part of our growth strategy, we have acquired businesses and may pursue acquisitions or other strategic relationships in the future that we believe willcomplement or expand our existing businesses or increase our customer base. We believe we could borrow additional funds under our current or new creditfacilities or sell equity for strategic reasons or to further strengthen our financial position.Off-Balance Sheet ArrangementsWe do not have any off-balance sheet arrangements.Contractual Obligations and Commercial CommitmentsThe following table provides aggregate information about our contractual payment obligations and the periods in which payments are due: Payments Due by Fiscal PeriodContractual Obligation 2020 2021 2022 2023 2024 More than5 Years Total (In thousands)Senior secured revolver (1) $— $— $— $— $85,000 $— $85,000Interest payments (2) $3,291 $3,291 $3,291 $3,291 $3,291 $— $16,455Operating lease obligations $2,198 $1,783 $1,407 $1,352 $1,183 $5,473 $13,396Pension withdrawal liability (3) $467 $467 $467 $467 $467 $4,439 $6,774(1)Represents balance outstanding as of March 31, 2019, and assumes such amount remains outstanding until its maturity date. See Note 8 of ourconsolidated Financial Statements for further information.(2) Represents interest payments and commitment fees payable on outstanding balances under our revolver, and assumes interest rates remain unchangedfrom the rate as of March 31, 2019.(3)This relates to our withdrawal from a multiemployer pension plan. Payments on this obligation will continue through 2034.Critical Accounting PoliciesIn preparing the financial statements, we follow U.S. generally accepted accounting principles (“GAAP”). The preparation of these financial statementsrequires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingentassets and liabilities. We re-evaluate our estimates on an on-going basis. Our estimates are based on historical experience and on various other assumptionsthat are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions. Weconsider the following policies to involve the most judgment in the preparation of our financial statements.Goodwill and Infinite-life Intangible Assets - Goodwill represents the excess of the cost of acquired businesses over the fair value of identifiable tangible netassets and identifiable intangible assets purchased. Goodwill is tested at least annually for impairment,20and is tested for impairment more frequently if events or changes in circumstances indicate that the asset might be impaired. Our annual test for impairment isas of the first day of our fourth fiscal quarter, or December 31, 2018 for fiscal 2019. For our Water Treatment reporting unit, we performed an analysis ofqualitative factors to determine whether it is more likely than not that the fair value of the unit is less than its carrying amount as a basis for determiningwhether it is necessary to perform a quantitative goodwill impairment test. Based on management’s analysis of qualitative factors, we determined that it wasnot necessary to perform a quantitative goodwill impairment test for Water Treatment reporting unit.We performed a quantitative goodwill impairment analysis for both our Industrial and Health and Nutrition reporting units which required us to estimate thefair value of the reporting units and compare the fair value to the reporting units’ carrying value. For our Industrial reporting unit, we utilized a discountedcash flow approach to calculate the present value of projected future cash flows using appropriate discount rates. For our Health and Nutrition reporting unit,we used a combination of a discounted cash flow approach and two market approaches to calculate the fair value of the Health and Nutrition reporting unit.The guideline company market approach provides indications of value based on market multiples (enterprise value divided by earnings before interest, taxes,depreciation and amortization “EBITDA”) for selected public companies involved in similar lines of business, and the reference transaction market approachprovides indications of value based on multiples paid for recent selected acquisitions by companies in similar lines of business. The fair values derived fromthese valuation methods are then weighted to determine an estimated fair value for the reporting unit, which is compared to the carrying value of thereporting unit to determine whether impairment exists. The resulting fair values were weighted using 50% for the discounted cash flow method and 25% forboth of the market approaches, to determine a concluded enterprise value for the Health and Nutrition reporting unit. The approaches were weightedaccording to reliability of each approach and the number of factors they incorporate.In determining the fair value of our Industrial and Health and Nutrition reporting units using the discounted cash flow approach, we considered our projectedoperating results and then made a number of assumptions. These assumptions included future business plans, economic projections and market data as well asmanagement estimates regarding future cash flows and operating results. The key assumptions we used in preparing our discounted cash flow analysis are(1) projected cash flows, (2) risk adjusted discount rate, and (3) expected long term growth rate. We then compared the total fair values for all reporting unitsto our overall market capitalization as a test of the reasonableness of this approach. For this comparison, the fair value of the Water Treatment reporting unitwas estimated based on a multiple of EBITDA. As of December 31, 2018, the estimated fair values of our Industrial and Health and Nutrition Reporting unitswere more than their carrying values and accordingly no impairment charge was recorded.We performed a similar analysis on our Health and Nutrition Reporting unit during the fourth quarter of fiscal 2018 and recorded an impairment charge of$39.1 million in the fourth quarter of fiscal 2018. The impairment charge was a result of changes in expectations for future growth as part of our fourth quarterlong-term strategic planning process to align with historical rates and expected changes in future product mix.Business Acquisitions - We account for acquired businesses using the acquisition method of accounting which requires that the assets acquired and liabilitiesassumed be recorded at the date of acquisition at their respective fair values. The judgments made in determining the estimated fair value assigned to eachclass of assets acquired and liabilities assumed, as well as asset lives, can materially impact net income. Accordingly, for significant items, we typicallyobtain assistance from a third-party valuation expert.There are several methods that can be used to determine the fair value of assets acquired and liabilities assumed in a business combination. For intangibleassets, we normally utilize one or more forms of the “income method.” This method starts with a forecast of all of the expected future net cash flowsattributable to the subject intangible asset. These cash flows are then adjusted to present value by applying an appropriate discount rate that reflects the riskfactors associated with the cash flow streams. Some of the more significant estimates and assumptions inherent in the income method (or other methods)include the projected future cash flows (including timing) and the discount rate reflecting the risks inherent in the future cash flows.Estimating the useful life of an intangible asset also requires judgment. For example, different types of intangible assets will have different useful lives,influenced by the nature of the asset, competitive environment, and rate of change in the industry. Certain assets may even be considered to have indefiniteuseful lives. All of these judgments and estimates can significantly impact the determination of the amortization period of the intangible asset, and thus netincome.Recently Issued Accounting PronouncementsIn June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losseson instruments within its scope, including trade receivables. This update is intended to provide financial statement users with more decision-usefulinformation about the expected credit losses. This ASU21is effective for annual periods and interim periods for those annual periods beginning after December 15, 2019, which for us is our fiscal year beginningMarch 30, 2020. Entities may early adopt beginning after December 15, 2018. We are currently evaluating the impact of the adoption of ASU 2016-13 on ourconsolidated financial statements. See Item 8, “Note 1 - Nature of Business and Significant Accounting Policies” of the Notes to Consolidated Financial Statements for information regardingrecently adopted accounting standards.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKWe are subject to the risk inherent in the cyclical nature of commodity chemical prices. However, we do not currently purchase forward contracts or otherwiseengage in hedging activities with respect to the purchase of commodity chemicals. We attempt to pass changes in the cost of our materials on to ourcustomers; however, there are no assurances that we will be able to pass on the increases in the future.We are exposed to market risks related to interest rates. Our exposure to changes in interest rates is limited to borrowings under our credit facility. A 25-basispoint change in interest rates on the variable-rate portion of debt not covered by the interest rate swap would potentially increase or decrease annual interestexpense by approximately $0.1 million. Other types of market risk, such as foreign currency risk, do not arise in the normal course of our business activities.22ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAReport of Independent Registered Public Accounting FirmThe Board of Directors and Shareholders of Hawkins, Inc.:Opinions on the Consolidated Financial Statements and Internal Control Over Financial ReportingWe have audited the accompanying consolidated balance sheets of Hawkins, Inc. and subsidiaries (the Company) as of March 31, 2019 and April 1, 2018,and the related consolidated statements of income (loss), comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in thethree‑year period then ended and the related notes and financial statement schedule II (collectively, the consolidated financial statements). We also haveaudited the Company’s internal control over financial reporting as of March 31, 2019, based on criteria established in Internal Control - IntegratedFramework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as ofMarch 31, 2019 and April 1, 2018, and the results of its operations and its cash flows for each of the years in the three‑year period ended March 31, 2019, inconformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internalcontrol over financial reporting as of March 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission.Basis for OpinionsThe Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting,and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on InternalControl Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on theCompany’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company AccountingOversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities lawsand the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internalcontrol over financial reporting was maintained in all material respects.Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financialstatements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles usedand significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internalcontrol over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performingsuch other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.23Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ KPMG LLPWe have served as the Company’s auditor since 2009.Minneapolis, MinnesotaMay 23, 201924HAWKINS, INC.CONSOLIDATED BALANCE SHEETS(In thousands, except share and per-share data) March 31, 2019 April 1, 2018ASSETS CURRENT ASSETS: Cash and cash equivalents $9,199 $4,990Trade receivables less allowance for doubtful accounts of $620 for 2019 and $942 for 2018 63,966 63,507Inventories 60,482 59,736Income taxes receivable 527 2,643Prepaid expenses and other current assets 5,235 4,106Total current assets 139,409 134,982PROPERTY, PLANT, AND EQUIPMENT: Land 9,140 9,540Buildings and improvements 96,389 96,105Machinery and equipment 93,153 89,324Transportation equipment 29,744 26,790Office furniture and equipment 16,435 16,406 244,861 238,165Less accumulated depreciation 126,233 114,339Net property, plant, and equipment 118,628 123,826OTHER ASSETS: Goodwill 58,440 58,440Intangible assets, net 65,726 71,179Other 3,396 2,564Total other assets 127,562 132,183Total assets $385,599 $390,991LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable — trade $29,314 $33,424Dividends payable — 4,704Accrued payroll and employee benefits 12,483 8,399Current portion of long-term debt 9,907 9,864Container deposits 1,299 1,241Other current liabilities 2,393 2,935Total current liabilities 55,396 60,567LONG-TERM DEBT, LESS CURRENT PORTION 74,658 90,762PENSION WITHDRAWAL LIABILITY 5,316 5,646OTHER LONG-TERM LIABILITIES 5,695 4,386DEFERRED INCOME TAXES 26,673 27,383Total liabilities 167,738 188,744COMMITMENTS AND CONTINGENCIES — —SHAREHOLDERS’ EQUITY: Common stock; authorized: 30,000,000 shares of $0.05 par value; 10,592,450 and 10,631,992 sharesissued and outstanding for 2019 and 2018, respectively 530 532Additional paid-in capital 52,609 53,877Retained earnings 164,405 147,242Accumulated other comprehensive income 317 596Total shareholders’ equity 217,861 202,247Total liabilities and shareholders’ equity $385,599 $390,991See accompanying notes to consolidated financial statements.25HAWKINS, INC.CONSOLIDATED STATEMENTS OF INCOME (LOSS)(In thousands, except share and per-share data) Fiscal Year Ended March 31, 2019 April 1, 2018 April 2, 2017Sales $556,326 $504,169 $483,593Cost of sales (460,390) (417,409) (385,520)Gross profit 95,936 86,760 98,073Selling, general and administrative expenses (59,118) (59,403) (59,381)Goodwill impairment — (39,116) —Operating income (loss) 36,818 (11,759) 38,692Interest expense, net (3,361) (3,408) (2,644)Other income 73 91 —Income (loss) before income taxes 33,530 (15,076) 36,048Income tax (expense) benefit (9,097) 5,899 (13,493)Net income (loss) $24,433 $(9,177) $22,555 Weighted average number of shares outstanding-basic 10,654,887 10,607,422 10,536,347Weighted average number of shares outstanding-diluted 10,726,176 10,643,719 10,596,110 Basic earnings (loss) per share $2.29 $(0.87) $2.14Diluted earnings (loss) per share $2.28 $(0.86) $2.13 Cash dividends declared per common share $0.68 $0.88 $0.84See accompanying notes to consolidated financial statements.26HAWKINS, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(In thousands) Fiscal Year Ended March 31, 2019 April 1, 2018 April 2, 2017 Net income (loss)$24,433 $(9,177) $22,555Other comprehensive income, net of tax: Unrealized (loss) gain on interest rate swap(280) 296 301 Unrealized gain on post-retirement liability1 2 2Total other comprehensive (loss) income(279) 298 303Total comprehensive income (loss)$24,154 $(8,879) $22,858See accompanying notes to consolidated financial statements.27HAWKINS, INC.CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY(In thousands, except share data) Common Stock AdditionalPaid-inCapital RetainedEarnings Accumulated OtherComprehensive Income(Loss) TotalShareholders’EquityShares Amount BALANCE — April 3, 2016 10,512,471 $526 $48,189 $152,265 $(5) $200,975Cash dividends declared (8,923) (8,923)Share-based compensationexpense 2,127 2,127Tax benefit on share-basedcompensation plans 131 131Vesting of restricted stock 44,113 2 (2) —Shares surrendered for payrolltaxes (12,974) (1) (630) (631)ESPP shares issued 38,986 2 1,289 1,291Other comprehensive income, netof tax 303 303Net income 22,555 22,555BALANCE — April 2, 2017 10,582,596 $529 $51,104 $165,897 $298 $217,828Cash dividends declared (9,400) (9,400)Share-based compensationexpense 1,371 1,371Vesting of restricted stock 8,092 1 (1) —ESPP shares issued 41,304 2 1,403 1,405Other comprehensive income, netof tax (78) 298 220Net loss (9,177) (9,177)BALANCE — April 1, 2018 10,631,992 $532 $53,877 $147,242 $596 $202,247Cash dividends declared (7,270) (7,270)Share-based compensationexpense 2,010 2,010Vesting of restricted stock 33,051 2 (2) —Shares surrendered for payrolltaxes (8,105) (1) (265) (266)ESPP shares issued 43,678 2 1,336 1,338Shares repurchased (108,166) (5) (4,347) (4,352)Other comprehensive income, netof tax (279) (279)Net income 24,433 24,433BALANCE — March 31, 2019 10,592,450 $530 $52,609 $164,405 $317 $217,861See accompanying notes to consolidated financial statements.28HAWKINS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands) Fiscal Year Ended March 31, 2019 April 1, 2018 April 2, 2017CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $24,433 $(9,177) $22,555Reconciliation to cash flows: Depreciation and amortization 21,756 22,390 20,875Amortization of debt issuance costs 122 136 136Gain on deferred compensation assets (73) (92) —Goodwill impairment — 39,116 —Deferred income taxes (607) (14,757) (525)Share-based compensation expense 2,010 1,371 2,127Loss (gain) from property disposals 415 (46) 322Changes in operating accounts (using) providing cash: Trade receivables (487) (6,164) 2,259Inventories (746) (8,487) (3,529)Accounts payable (4,137) 4,157 562Accrued liabilities 4,752 1,674 (416)Income taxes 2,116 (1,711) 569Other (1,564) (1,061) (80)Net cash provided by operating activities 47,990 27,349 44,855CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant, and equipment (12,618) (19,703) (21,616)Proceeds from property disposals 275 364 324Acquisition — — (2,199)Net cash used in investing activities (12,343) (19,339) (23,491)CASH FLOWS FROM FINANCING ACTIVITIES: Cash dividends paid (11,975) (9,161) (8,683)New shares issued 1,338 1,405 1,291Excess tax benefit from share-based compensation — — 131Shares surrendered for payroll taxes (266) — (631)Shares repurchased (4,352) — —Payments for debt issuance costs (183) — —Payments on senior secured term loan (85,000) (8,125) (5,625)Payments on senior secured revolving credit facility (24,000) (21,000) (21,000)Proceeds from revolver borrowings 93,000 27,000 —Net cash used in financing activities (31,438) (9,881) (34,517)NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,209 (1,871) (13,153)CASH AND CASH EQUIVALENTS - beginning of year 4,990 6,861 20,014CASH AND CASH EQUIVALENTS - end of year $9,199 $4,990 $6,861SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION- Cash paid during the year for income taxes $7,589 $10,232 $13,421Cash paid for interest 3,160 3,025 2,341Noncash investing activities - Capital expenditures in accounts payable 495 468 958See accompanying notes to consolidated financial statements.29HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNote 1 — Nature of Business and Significant Accounting PoliciesNature of Business - We have three reportable segments: Industrial, Water Treatment and Health and Nutrition. The Industrial Group specializes in providingindustrial chemicals, products and services to industries such as agriculture, chemical processing, electronics, energy, food, pharmaceutical and plating. Thisgroup also manufactures and sells certain food-grade products, including liquid phosphates, lactates and other blended products. The Water Treatment Groupspecializes in providing chemicals, equipment and solutions for potable water, municipal and industrial wastewater, industrial process water and non-residential swimming pool water. This group has the resources and flexibility to treat systems ranging in size from a single small well to a multi-million-gallon-per-day facility. Our Health and Nutrition Group specializes in providing ingredient distribution, processing and formulation solutions tomanufacturers of nutraceutical, functional food and beverage, personal care, dietary supplement and other nutritional food, health and wellness products.This group offers a diverse product portfolio including minerals, botanicals and herbs, vitamins and amino acids, excipients, joint products, sweeteners andenzymes.Fiscal Year - Our fiscal year is a 52 or 53-week year ending on the Sunday closest to March 31. Our fiscal years ended March 31, 2019 (“fiscal 2019”),April 1, 2018 (“fiscal 2018”) and April 2, 2017 (“fiscal 2017”) were 52 weeks. The fiscal year ending March 29, 2020 (“fiscal 2020”) will also be 52 weeks.Principles of Consolidation - The consolidated financial statements include the accounts of Hawkins, Inc. and its wholly-owned subsidiaries. Allintercompany transactions and accounts have been eliminated.Estimates - The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management tomake estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.Revenue Recognition - Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products. Revenue isrecognized when we satisfy our performance obligations under the contract. We recognize revenue upon transfer of control of the promised products to thecustomer, with revenue recognized at the point in time the customer obtains control of the products. Net sales include products and shipping charges, net ofestimates for product returns and any related sales rebates. We estimate product returns based on historical return rates. Using probability assessments, weestimate sales rebates expected to be paid over the term of the contract. The majority of our contracts have a single performance obligation and are short termin nature. Sales taxes that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excludedfrom net sales. We offer certain customers cash discounts and volume rebates as sales incentives. The discounts and volume rebates are recorded as areduction in sales at the time revenue is recognized in an amount estimated based on historical experience and contractual obligations.Shipping and Handling - All shipping and handling amounts billed to customers are included in revenues. Costs incurred related to the shipping and thehandling of products are included in cost of sales.Fair Value Measurements - The financial assets and liabilities that are re-measured and reported at fair value for each reporting period are an interest rateswap and marketable securities. There are no fair value measurements with respect to nonfinancial assets or liabilities that are recognized or disclosed at fairvalue in our consolidated financial statements on a recurring basis.Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as ofthe measurement date:Level 1: Valuation is based on quoted prices in active markets for identical assets or liabilities.Level 2: Valuation is based on quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or liabilitiesin markets that are not active, or inputs other than quoted prices that are observable or can be corroborated by observable market data for the asset orliability.Level 3: Valuation is based upon unobservable inputs for the asset or liability that are supported by little or no market activity. These fair values aredetermined using pricing models for which the assumptions utilize management’s estimates or market participant assumptions.30HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)In making fair value measurements, observable market data must be used when available. When inputs used to measure fair value fall within different levelsof the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair valuemeasurement.Cash Equivalents - Cash equivalents include all liquid debt instruments (primarily cash funds and money market accounts) purchased with an originalmaturity of three months or less. The cash balances, maintained at large commercial banking institutions with strong credit ratings, may, at times, exceedfederally insured limits.Trade Receivables and Concentrations of Credit Risk - Financial instruments, which potentially subject us to a concentration of credit risk, principallyconsist of trade receivables. We sell our principal products to a large number of customers in many different industries. There are no concentrations of creditrisk with a single customer from a particular service or geographic area that would significantly impact us in the near term. To reduce credit risk, we routinelyassess the financial strength of our customers. We record an allowance for doubtful accounts to reduce our receivables to an amount we estimate is collectiblefrom our customers. Estimates used in determining the allowance for doubtful accounts are based on historical collection experience, current trends, aging ofaccounts receivable and periodic evaluations of our customers’ financial condition.Inventories - Inventories, consisting primarily of finished goods, are primarily valued at the lower of cost or net realizable value, with cost for approximately69% of our inventory determined using the last-in, first-out (“LIFO”) method. Cost for the other 31% of our total inventory is determined using the first-in,first-out (“FIFO”) method.Property, Plant and Equipment - Property is stated at cost and depreciated or amortized over the lives of the assets, using the straight-line method. Estimatedlives are: 10 to 40 years for buildings and improvements; 3 to 20 years for machinery and equipment; and 3 to 10 years for transportation equipment andoffice furniture and equipment including computer systems. Leasehold improvements are depreciated over the lesser of their estimated useful lives or theremaining lease term.Significant improvements that add to productive capacity or extend the lives of properties are capitalized. Costs for repairs and maintenance are charged toexpense as incurred. When property is retired or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from theaccounts and any related gains or losses are included in income.We review the recoverability of long-lived assets to be held and used, such as property, plant and equipment, when events or changes in circumstances occurthat indicate the carrying value of the asset group may not be recoverable, such as prolonged industry downturn or significant reductions in projected futurecash flows. The assessment of possible impairment is based on our ability to recover the carrying value of the asset group from the expected future pre-taxcash flows (undiscounted) of the related operations. If these cash flows are less than the carrying value of such asset group, an impairment loss would bemeasured by the amount the carrying value exceeds the fair value of the long-lived asset group. The measurement of impairment requires us to estimate futurecash flows and the fair value of long-lived assets. No long-lived assets were determined to be impaired during fiscal years 2019, 2018 or 2017.Goodwill and Identifiable Intangible Assets - Goodwill represents the excess of the cost of acquired businesses over the fair value of identifiable tangible netassets and identifiable intangible assets purchased. Goodwill is tested at least annually for impairment, and is tested for impairment more frequently if eventsor changes in circumstances indicate that the asset might be impaired. Our annual test for impairment is as of the first day of our fourth fiscal quarter. As ofDecember 31, 2018, we performed an analysis of qualitative factors for our Water Treatment reporting unit to determine whether it is more likely than not thatthe fair value of this reporting unit was less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwillimpairment test. Based on management’s analysis of qualitative factors, we determined that it was not necessary to perform a quantitative goodwillimpairment test for the Water Treatment reporting unit.We performed a quantitative goodwill impairment test for our Industrial and Health and Nutrition reporting units. This test, used to identify potentialimpairment, compares the fair value of each reporting unit with its carrying amount, including indefinite-lived intangible assets. If the fair value exceeds thecarrying amount, the goodwill is not considered impaired. If the carrying amount exceeds the fair value, the reporting unit’s goodwill is considered impaired,and we must recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The fair value of both ofthese reporting units exceeded their respective carrying values as of December 31, 2018, and accordingly we did not record a goodwill impairment charge.Goodwill impairment assessments were also completed in the fourth quarters of fiscal 2018 and 2017. We recorded a $39.1 million impairment charge duringthe fourth quarter of fiscal 2018 in our Health and Nutrition reporting unit. The impairment charge was31HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)recorded as a result of changes in expectations for future growth as part of our fourth quarter long-term strategic planning process to align with historicalexperience in recent periods and expected changes in future product mix.Our primary identifiable intangible assets include customer lists, trade secrets, non-competition agreements, trademarks and trade names acquired in previousbusiness acquisitions. Identifiable intangible assets with finite lives are amortized whereas identifiable intangible assets with indefinite lives are notamortized. The values assigned to the intangible assets with finite lives are being amortized on average over approximately 14 years. Identifiable intangibleassets that are subject to amortization are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may notbe recoverable. Identifiable intangible assets not subject to amortization are tested for impairment annually or more frequently if events warrant. Theimpairment test consists of a qualitative assessment to determine whether it is more likely than not that the asset is impaired. Based on management’s analysisof qualitative factors, we determined that it was not necessary to perform a quantitative impairment test for fiscal 2019.Impairment assessments were also completed in the fourth quarters of fiscal 2018 and 2017 which resulted in no impairment charges for either of these fiscalyears.Income Taxes - The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets andliabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets andliabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effectfor the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in incometax expense in the period that includes the enactment date. The deferred tax assets and liabilities are analyzed regularly, and management assesses thelikelihood that deferred tax assets will be recovered from future taxable income. We record any interest and penalties related to income taxes as income taxexpense in the consolidated statements of income.The effects of income tax positions are recognized only if those positions are more likely than not of being sustained. Changes in recognition or measurementare made as facts and circumstances change. See note 13 for further information regarding the recording of a liability and offsetting receivable regarding anuncertain tax position taken by Stauber prior to its acquisition by us.Stock-Based Compensation - We account for stock-based compensation on a fair value basis. The estimated grant date fair value of each stock-based award isrecognized in expense over the requisite service period (generally the vesting period). Non-vested share awards are recorded as expense over the requisiteservice periods based on the market value on the date of grant.Earnings Per Share - Basic earnings per share (“EPS”) are computed by dividing net income by the weighted-average number of common shares outstanding.Diluted EPS are computed by dividing net income by the weighted-average number of common shares outstanding including the incremental shares assumedto be issued as performance units and restricted stock. Basic and diluted EPS were calculated using the following: March 31, 2019 April 1, 2018 April 2, 2017Weighted average common shares outstanding — basic 10,654,887 10,607,422 10,536,347Dilutive impact of stock performance units and restricted stock 71,289 36,297 59,763Weighted average common shares outstanding — diluted 10,726,176 10,643,719 10,596,110There were no shares or stock options excluded from the calculation of weighted average common shares for diluted EPS for fiscal 2019, 2018 or 2017.Derivative Instruments and Hedging Activities - We are subject to interest rate risk associated with our variable rate debt. We have in place an interest rateswap which was has been designated as a cash flow hedge, the purpose of which is to eliminate the cash flow impact of interest rate changes on a portion ofour variable-rate debt. The hedge was measured at fair value on the contract date and is subsequently remeasured to fair value at each reporting date. Changesin the fair value of a derivative that is highly effective, and that is designated and qualifies as a cash flow hedge, are recorded in other comprehensive income,until the consolidated statement of income is affected by the variability in cash flows of the designated hedged item. To the extent that the hedge isineffective, changes in the fair value are recognized in the Statement of Income.32HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Recently Issued Accounting PronouncementsIn March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02 which provides new accountingguidance requiring lessees to recognize most leases as assets and liabilities on the balance sheet. The original guidance required application on a modifiedretrospective basis with the earliest period presented. In August 2018, the FASB issued ASU 2018-11, Targeted Improvements to ASC 842, which includes anoption to not restate comparative periods in transition and elect to use the effective date of ASU 2016-02 as the date of initial application of transition. Weadopted this ASU on April 1, 2019, the first day of our fiscal 2020, and elected the transition option provided under ASU 2018-11. Upon adoption, weestimate both assets and liabilities on our Consolidated Balance Sheets will increase by approximately $10 million to reflect the right of use asset and leaseliabilities resulting from our operating leases. Changes in our lease population or changes in incremental borrowing rates may alter this estimate. We expectto expand our consolidated financial statement disclosures in connection with adoption of this standard.Recently Adopted Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, which provides accounting requirements for recognition of revenuefrom contracts with customers. We adopted the new standard effective April 2, 2018, and there was no impact to our financial position or results of operations.See Note 2 for disclosures required upon adoption of this new standard.In January 2016, the FASB issued ASU 2016-01 which provides guidance that addresses certain aspects of recognition, measurement, presentation, anddisclosure of financial instruments. We adopted the new standard effective April 2, 2018, and there was no impact to our financial position or results ofoperations.In February 2018, the FASB issued ASU 2018-02 which allows a reclassification from accumulated other comprehensive income to retained earnings forstranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). Hawkins early adopted this standard during the fourth quarter of fiscal2018 and reclassified approximately $0.1 million from other comprehensive income to retained earnings.In December 2017, the Securities and Exchange Commission (“SEC”) staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the applicationof U.S. GAAP related to the enactment of the Tax Act. This guidance was adopted in the third quarter of fiscal 2018. Additional information regarding ouradoption of this guidance is contained in Note 12.In March 2016, the FASB issued ASU 2016-09, which provides accounting guidance intended to improve the accounting for share-based paymenttransactions. This guidance outlines new provisions intended to simplify various aspects related to accounting for share-based payments and theirpresentation in the financial statements. We adopted this guidance in the first quarter of fiscal 2018. We will continue to estimate forfeitures as we determinecompensation cost each period. The primary impact on our consolidated financial statements is the recognition of excess tax benefits in the provision forincome taxes rather than additional paid-in capital, which may result in increased volatility in the reported amounts of income tax expense and net income.In July 2015, the FASB issued ASU 2015-11, which requires companies to change the measurement principal for inventory measured using the first-in, first-out (“FIFO”) or average cost method from the lower of cost or market to the lower of cost and net realizable value. Treatment of inventory valued under thelast-in, last-out (“LIFO”) method is unchanged by this guidance. We adopted this guidance in the first quarter of fiscal 2018 and there was no impact to ourfinancial position or results of operations.Note 2 — RevenueOn April 2, 2018, we adopted ASU 2014-09 using the modified retrospective method applied to those contracts which were not completed as of April 2,2018. Results for reporting periods beginning after April 2, 2018 are presented under ASU 2014-09, while prior period amounts are not adjusted and continueto be reported in accordance with historic accounting under Accounting Standards Codification (“ASC”) Topic 605.Our revenue arrangements generally consist of a single performance obligation to transfer promised goods or services. As a result, the application of ASU2014-09 had no impact on our financial statement line items as compared with the guidance that was in effect before the change. Accordingly, the impact ofadopting the standard resulted in no adjustment to accumulated retained earnings.We disaggregate revenues from contracts with customers by both operating segments and types of product sold. Reporting by operating segment is pertinentto understanding our revenues, as it aligns to how we review the financial performance of our33HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)operations. Types of products sold within each operating segment help us to further evaluate the financial performance of our segments.The following table disaggregates external customer net sales by major revenue stream: Fiscal Year Ended March 31, 2019:(In thousands)Industrial Water Treatment Health and Nutrition TotalBulk / Distributed specialty products (1)$61,231 $21,774 $109,067 $192,072Manufactured, blended or repackaged products (2)216,582 126,257 15,685 358,524Other4,047 1,459 224 5,730Total external customer sales$281,860 $149,490 $124,976 $556,326(1)For our Industrial and Water Treatment segments, this line includes our bulk products that we do not modify in any way, but receive, store, and ship from our facilities, ordirect ship to our customers in large quantities. For our Health and Nutrition segment, this line includes our non-manufactured distributed specialty products, which maybe sold out of one of our facilities or direct shipped to our customers.(2)For our Industrial and Water Treatment segments, this line includes our non-bulk specialty products that we either manufacture, blend, repackage, resell in their originalform, or direct ship to our customers in smaller quantities, and services we provide for our customers. For our Health and Nutrition segment, this line includes productsmanufactured, processed or repackaged in our facility and/or with our equipment.Net sales include products and shipping charges, net of estimates for product returns and any related sales rebates. Revenue is measured as the amount ofconsideration we expect to receive in exchange for transferring products. All revenue is recognized when we satisfy our performance obligations under thecontract. Our criteria for recording revenue is consistent between our operating segments and types of products sold. We recognize revenue upon transfer ofcontrol of the promised products to the customer, with revenue recognized at the point in time the customer obtains control of the products. In arrangementswhere product is shipped directly from the vendor to our customer, we act as the principal in the transaction as we direct the other party to provide theproduct to our customer on our behalf, take inventory risk, establish the selling price, and are exposed to credit risk for the collection of the invoiced amount.If there were circumstances where we were to manufacture products for customers that were unique to their specifications and we would be prohibited bycontract to use the product for any alternate use, we would recognize revenue over time if all criteria were met. We have made a policy election to treatshipping costs for FOB shipping point sales as fulfillment costs. As such, we recognize revenue for all shipping charges, if applicable, at the same time werecognize revenue on the products delivered. We estimate product returns based on historical return rates. Using probability assessments, we estimate salesrebates expected to be paid over the term of the contract. The majority of our contracts have a single performance obligation and are short term in nature.Sales taxes that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from netsales. We offer certain customers cash discounts and volume rebates as sales incentives. The discounts and volume rebates are recorded as a reduction in salesat the time revenue is recognized in an amount estimated based on historical experience and contractual obligations. We periodically review the assumptionsunderlying our estimates of discounts and volume rebates and adjusts revenues accordingly.Note 3 — Derivative InstrumentsWe have in place an interest rate swap agreement to manage the risk associated with a portion of our variable-rate long-term debt. We do not utilizederivative instruments for speculative purposes. The interest rate swap involves the exchange of fixed-rate and variable-rate payments without the exchangeof the underlying notional amount on which the interest payments are calculated. The swap agreement will terminate on December 23, 2020. The notionalamount of the swap agreement is currently $30 million through August 31, 2019 and reduces to $20 million from September 1, 2019 through December 23,2020. We have designated this swap as a cash flow hedge and have determined that it qualifies for hedge accounting treatment. For so long as the hedge iseffective, changes in fair value of the cash flow hedge are recorded in other comprehensive income or loss (net of tax) until income or loss from the cash flowsof the hedged item is realized.For the year ended March 31, 2019, we recorded $0.3 million in other comprehensive income related to unrealized losses (net of tax) on the cash flow hedgedescribed above. For each of the years ended April 1, 2018 and April 2, 2017, we recorded $0.3 million in other comprehensive income related to unrealizedgains (net of tax) on the cash flow hedge. Included in other long-term assets on our condensed consolidated balance sheet was $0.4 million as of March 31,2019 and $0.8 million as of April 1, 2018.34HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)By their nature, derivative instruments are subject to market risk. Derivative instruments are also subject to credit risk associated with counterparties to thederivative contracts. Credit risk associated with derivatives is measured based on the replacement cost should the counterparty with a contract in a gainposition to us fail to perform under the terms of the contract. We do not anticipate nonperformance by the counterparty.Note 4 – Fair Value MeasurementsOur financial assets and liabilities are measured at fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderlytransaction between market participants at the measurement date (exit price). The carrying value of cash equivalents, accounts receivable, accounts payable,and accrued expenses approximate fair value because of the short-term nature of these instruments. Because of the variable-rate nature of our debt under ourcredit facility, our debt also approximates fair value. We classify the inputs used to measure fair value into the following hierarchy:Level 1: Quoted prices in active markets for identical assets or liabilities.Level 2: Quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or liabilities inmarkets that are not active, or inputs other than quoted prices that are observable or can be corroborated by observablemarket data for the asset or liability.Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity. These fair values aredetermined using pricing models for which the assumptions utilize management’s estimates or market participantassumptions.Assets and Liabilities Measured at Fair Value on a Recurring Basis. The fair value hierarchy requires the use of observable market data when available. Ininstances where inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined basedon the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular item to the fairvalue measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.Our financial assets that are measured at fair value on a recurring basis are an interest rate swap and assets held in a deferred compensation retirement plan.Both of these assets are classified as other long-term assets on our balance sheet, with the portion of the deferred compensation retirement plan assetsexpected to be paid within twelve months reclassified to current assets. The fair value of the interest rate swap is determined by the respective counterpartiesbased on interest rate changes. Interest rate swaps are valued based on observable interest rate yield curves for similar instruments. The deferred compensationplan assets relate to contributions made to a non-qualified compensation plan, established in fiscal 2017, on behalf of certain employees who are classified as“highly compensated employees” as determined by IRS guidelines. The assets are part of a rabbi trust and the funds are held in mutual funds. The fair valueof the deferred compensation is based on the quoted market prices for the mutual funds at the end of the period.The following table summarizes the balances of assets or liabilities measured at fair value on a recurring basis as of March 31, 2019 and April 1, 2018. 0 March 31, 2019 (In thousands) Level 1 Level 2 Level 3 Interest rate swap — $435 — Deferred compensation plan assets $2,637 — — April 1, 2018 (In thousands) Level 1 Level 2 Level 3 Interest rate swap — $819 — Deferred compensation plan assets 1,392 — — 35HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Note 5 – Assets Held for SaleIn the third quarter of fiscal 2019, management entered into a plan of action to dispose of an office building in St. Louis, Missouri currently utilized in theadministration of our Industrial segment. The amount of office space in this facility is no longer needed due to current staffing levels, and managementexpects to relocate affected employees to leased space. The building is listed for sale at a price in excess of its current book value, and thus no impairment hasbeen recognized. The $0.9 million net book value of this property is recorded as an asset held for sale within prepaid expenses and other current assets on ourbalance sheet.Note 6 — InventoriesInventories at March 31, 2019 and April 1, 2018 consisted of the following: 2019 2018(In thousands) Inventory (FIFO basis) $65,526 $65,322LIFO reserve (5,044) (5,586)Net inventory $60,482 $59,736The FIFO value of inventories accounted for under the LIFO method was $45.2 million at March 31, 2019 and $44.0 million at April 1, 2018. The remainderof the inventory was valued and accounted for under the FIFO method.We decreased the LIFO reserve by $0.5 million in fiscal 2019 due to lower volumes of certain inventory on hand. In fiscal 2018, the LIFO reserve increasedby $4.1 million due to an increase in per-unit inventory costs of certain bulk commodity products and higher volumes of certain inventory on hand.Note 7 — Goodwill and Other Identifiable Intangible AssetsThe changes in the carrying amount of goodwill for each of our three reportable segments were as follows:(In thousands)IndustrialWater TreatmentHealth andNutritionTotalBalance as of April 2, 2017$6,495$7,000$84,061$97,556Impairment——(39,116)(39,116)Balance as of April 1, 2018 and March 31, 2019$6,495$7,000$44,945$58,440 The following is a summary of our identifiable intangible assets as of March 31, 2019 and April 1, 2018: 2019 Gross Amount AccumulatedAmortization Net carryingvalue(In thousands) Finite-life intangible assets: Customer relationships $78,383 $(16,910) $61,473Trademarks and trade names 6,045 (3,115) 2,930Other finite-life intangible assets 3,648 (3,552) 96Total finite-life intangible assets 88,076 (23,577) 64,499Indefinite-life intangible assets 1,227 — 1,227Total intangible assets, net $89,303 $(23,577) $65,726 36HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 2018 Gross Amount AccumulatedAmortization Net carryingvalue(In thousands) Finite-life intangible assets: Customer relationships $78,383 $(12,419) $65,964Trademarks and trade names 6,045 (2,490) 3,555Other finite-life intangible assets 3,648 (3,215) 433Total finite-life intangible assets 88,076 (18,124) 69,952Indefinite-life intangible assets 1,227 — 1,227Total intangible assets, net $89,303 $(18,124) $71,179Intangible asset amortization expense was $5.5 million during fiscal 2019, $5.7 million during fiscal 2018, and $6.1 million during fiscal 2017.The estimated future amortization expense for identifiable intangible assets during the next five years is as follows:(In thousands) 2020 2021 2022 2023 2024Estimated amortization expense $5,073 $5,028 $4,891 $4,891 $4,891Note 8 – DebtOn November 30, 2018, we entered into an amended and restated credit agreement (the “Credit Agreement”) with U.S. Bank National Association (“U.S.Bank”) as Sole Lead Arranger and Sole Book Runner, and other lenders from time to time party thereto (collectively, the “Lenders”), whereby U.S. Bank isalso serving as Administrative Agent. The Credit Agreement refinanced the term and revolving loans under our previous credit agreement with U.S. Bank andprovides us with senior secured revolving credit facilities (the “Revolving Loan Facility”) totaling $150.0 million. The Revolving Loan Facility includes a$5.0 million letter of credit subfacility and $15.0 million swingline subfacility. The Revolving Loan Facility has a five-year maturity date, maturing onNovember 30, 2023. The Revolving Loan Facility is secured by substantially all of our personal property assets and those of our subsidiaries.We used $91.0 million of the proceeds from the Revolving Loan Facility to refinance the obligations under the previous credit facility. We may use theremaining amount of the Revolving Loan Facility for working capital, capital expenditures, share repurchases, restricted payments and acquisitions permittedunder the Credit Agreement, and other general corporate purposes.At March 31, 2019, the effective interest rate on our borrowings was 3.2%. In addition to paying interest on the outstanding principal under the RevolvingLoan Facility, we are required to pay a commitment fee on the unutilized commitments thereunder. The commitment fee is between 0.15% and 0.25%,depending on our leverage ratio.Debt issuance costs of $0.2 million paid to the lenders in connection with the Credit Agreement, as well as unamortized debt issuance costs of $0.3 millionpaid in connection with the previous credit facility, are reflected as a reduction of debt and are being amortized as interest expense over the term of theRevolving Loan Facility.Debt at March 31, 2019 and April 1, 2018 consisted of the following:(In thousands) March 31, 2019 April 1, 2018Senior secured term loan $— $85,000Senior secured revolver 85,000 16,000Total debt 85,000 101,000 Less: unamortized debt issuance costs (435) (374) Total debt, net of debt issuance costs 84,565 100,626 Less: current portion of long-term debt, net of current unamortized debt issuance costs (9,907) (9,864)Total long-term debt $74,658 $90,76237HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Note 9 — Share-Based Compensation Performance-Based Restricted Stock Units. Our Board of Directors has approved a performance-based equity compensation arrangement for our executiveofficers. This performance-based arrangement provides for the grant of performance-based restricted stock units that represent a possible future issuance ofrestricted shares of our common stock based on our pre-tax income target for the applicable fiscal year. The actual number of restricted shares to be issued toeach executive officer will be determined when our final financial information becomes available after the applicable fiscal year and will be between zeroshares and 69,252 shares in the aggregate for fiscal 2019. The restricted shares issued will fully vest two years after the end of the fiscal year on which theperformance is based. We record the compensation expense for the outstanding performance share units and then-converted restricted stock over the life ofthe awards.The following table represents the restricted stock activity for fiscal 2018 and 2019: Shares Weighted-Average GrantDate Fair ValueOutstanding at beginning of fiscal 2018 28,853 $43.10Granted 35,075 47.50Vested — —Forfeited or expired (12,785) 46.02Outstanding at end of fiscal 2018 51,143 $45.39Granted 7,818 31.35Vested (24,567) 43.10Forfeited or expired (1,511) 47.50Outstanding at end of fiscal 2019 32,883 $43.66The weighted average grant date fair value of performance-based restricted shares issued in fiscal 2019 was $31.35, fiscal 2018 was $47.50 and fiscal 2017was $43.10. We recorded compensation expense on performance-based restricted stock of approximately $1.3 million for fiscal 2019, $0.7 million for fiscal2018 and $1.4 million for fiscal 2017, substantially all of which was recorded in selling, general and administrative (“SG&A”) expense in the ConsolidatedStatements of Income. The total fair value of performance-based restricted stock units vested was $1.1 million in fiscal 2019 and $1.5 million in fiscal 2017.There were no performance-based restricted stock units that vested in fiscal 2018.Until the performance-based restricted stock units result in the issuance of restricted stock, the amount of expense recorded each period is dependent uponour estimate of the number of shares that will ultimately be issued and our then current common stock price. Upon issuance of restricted stock, we recordcompensation expense over the remaining vesting period using the award date closing price. Unrecognized compensation expense related to non-vestedrestricted stock and non-vested restricted share units as of March 31, 2019 was $1.8 million and is expected to be recognized over a weighted average periodof 1.4 years.Prior to the adoption of ASU 2016-09 in fiscal 2018, the benefits of tax deductions that varied from the recognized compensation costs from share-basedcompensation were recorded as a change in additional paid-in capital rather than a reduction in earnings. The amount of excess tax benefit recognized andrecorded in additional paid-in capital resulting from share-based compensation cost was $0.1 million in fiscal 2017.Restricted Stock Awards. As part of their retainer, our non-employee directors receive restricted stock for their Board services. The restricted stock awards areexpensed over a one-year vesting period, based on the market value on the date of grant. The following table represents the Board’s restricted stock activityfor fiscal 2018 and 2019:38HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Shares Weighted-Average GrantDate Fair ValueOutstanding at beginning of fiscal 2018 8,092 $43.24Granted 8,484 41.25Vested (8,092) 43.24Forfeited or expired — —Outstanding at end of fiscal 2018 8,484 $41.25Granted 8,352 35.90Vested (8,484) 41.25Forfeited or expired — —Outstanding at end of fiscal 2019 8,352 $35.90Annual expense related to the value of restricted stock was $0.3 million in fiscal 2019, 2018 and 2017, and was recorded in SG&A expense in theConsolidated Statements of Income. Unrecognized compensation expense related to non-vested restricted stock awards as of March 31, 2019 was $0.1million and is expected to be recognized over a weighted average period of 0.3 years.Note 10 — Share RepurchasesOur board of directors has authorized the repurchase of up to 800,000 shares of our outstanding common stock, increasing the amount authorized in fiscal2019 by 500,000 shares. The shares may be repurchased on the open market or in privately negotiated transactions subject to applicable securities laws andregulations. Upon repurchase of the shares, we reduce our common stock for the par value of the shares with the excess applied against additional paid-incapital. We repurchased 108,166 of common stock at an aggregate purchase price of $4.4 million during fiscal 2019. No shares were repurchased during fiscal2018 or 2017. As of March 31, 2019, the number of shares available to be purchased under the share repurchase program was 504,380.Note 11 — Profit Sharing, Employee Stock Ownership, Employee Stock Purchase and Pension PlansCompany Sponsored Plans. The majority of our non-bargaining unit employees are eligible to participate in a company-sponsored profit sharing plan.Contributions are made at our discretion subject to a maximum amount allowed under the Internal Revenue Code (“IRC”). The profit sharing plancontribution level for each employee depends upon date of hire, and was 2.5% or 5.0% of each employee’s eligible compensation for fiscal 2019, 2018 and2017. We also have in place a retirement plan covering our collective bargaining unit employees. The retirement plan provides for a contribution of 2.5% or5.0% of each employee’s eligible annual wages depending on their hire date. In addition to the employer contributions described above, both the profitsharing plan and the retirement plant include a 401(k) plan that allows employees to contribute pre-tax earnings up to the maximum amount allowed underthe IRC, with an employer match of up to 5% of the employee’s eligible compensation.We have two employee stock ownership plans (“ESOPs”), one covering the majority of our non-bargaining unit employees and the other covering ourcollective bargaining unit employees. Contributions to the plan covering our non-bargaining unit employees are made at our discretion. Contributions toboth plans are subject to a maximum amount allowed under the IRC, and were 2.5% or 5.0% of each employee’s eligible wages, depending on each eligibleemployee’s hire date, for fiscal 2019, 2018 and 2017.During fiscal 2017, we established a nonqualified deferred compensation plan covering employees who are classified as “highly compensated employees” asdetermined by IRS guidelines for the plan year and who were hired on or before April 1, 2012. Employees who are eligible for the nonqualified deferredcompensation plan for any plan year are not eligible for the profit sharing plan contribution or the ESOP contributions described above for that plan year. Ourcontribution to the nonqualified deferred compensation plan for fiscal 2019, 2018 and 2017 was 10% of each employee’s eligible compensation, subject tothe maximum amount allowed under the IRC.We have an employee stock purchase plan (“ESPP”) covering substantially all of our employees. The ESPP allows employees to purchase newly-issuedshares of the Company’s common stock at a discount from market. The number of new shares issued under the ESPP was 43,678 in fiscal 2019, 41,304 infiscal 2018 and 38,986 in fiscal 2017.The following represents the contribution expense for these company-sponsored plans for fiscal 2019, 2018 and 2017:39HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)(In thousands) 2019 2018 2017 Non-bargaining unit employee plans: Profit sharing $899 $779 $741 401(k) matching contributions 2,390 2,143 1,996 ESOP 899 779 741 Nonqualified deferred compensation plan 1,246 1,258 1,383 Bargaining unit employee plans 474 496 509 ESPP - all employees 376 364 364 Total contribution expense $6,284 $5,819 $5,734 In 2013 we withdrew from a collectively bargained multiemployer pension plan and recorded a liability for our share of the unfunded vested benefits.Payments of $467,000 per year are being made through 2034.Note 12 — Commitments and ContingenciesLeases. We have various operating leases for buildings and land on which some of our operations are located, trucks utilized for deliveries in certainbranches, and certain office equipment. Future minimum lease payments due under operating leases with an initial term of one year or more at March 31,2019 are as follows:(In thousands) 2020 2021 2022 2023 2024 ThereafterMinimum lease payment $2,198 $1,783 $1,407 $1,352 $1,183 $5,473Total rental expense for fiscal years 2019, 2018 and 2017 was as follows: 2019 2018 2017(In thousands) Minimum rentals $2,994 $2,959 $3,283Contingent rentals 23 26 28Total rental expense $3,017 $2,985 $3,311Litigation. As of March 31, 2019, there were no material pending legal proceedings, other than ordinary routine litigation incidental to the business, towhich we or any of our subsidiaries are a party or of which any of our property is the subject. Legal fees associated with such matters are expensed as incurred.Environmental Remediation: During fiscal 2018, we recorded a liability of $0.6 million related to estimated remediation expenses associated with existingtrichloroethylene contamination at our Minneapolis facility. The liability was decreased by $0.2 million during fiscal 2019 to reflect payments made andmanagement’s revised expectations related to the cost of this environmental remediation. The liability is not discounted as management expects to incurthese expenses within the next twelve months. Given the many uncertainties involved in assessing environmental claims, our reserves may prove to beinsufficient. While it is possible that additional expenses related to remediation will be incurred in future periods if currently unknown issues arise, we areunable to estimate the extent of any further financial impact.Asset Retirement Obligations. We have three leases of land which contain terms that state that at the end of the lease term, we have a specified amount oftime to remove the property and buildings. Including available lease extensions, these leases expire in 2023, 2033 and 2044. At that time, anything thatremains on the land becomes the property of the lessor, and the lessor has the option to either maintain the property or remove the property at our expense.We have not been able to reasonably estimate the fair value of the asset retirement obligations, primarily due to the combination of the following factors: Theleases do not expire in the near future; we have a history of extending the leases with the lessors and currently intend to do so at expiration of the leaseperiods; the lessors do not have a history of terminating leases with their tenants; and because it is more likely than not that the buildings will have value atthe end of the lease life and therefore, may not be removed by either the lessee or the lessor. Therefore, in accordance with accounting guidance related toasset retirement and environmental obligations, we have not recorded an asset retirement obligation as of March 31, 2019. We will continue to monitor thefactors surrounding the requirement to record an asset retirement obligation and will recognize the fair value of a liability in the period in which it is incurredand a reasonable estimate can be made.40HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Note 13 — Income TaxesThe Tax Act included a number of provisions, including lowering of the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. Under GAAP,deferred tax assets and liabilities are required to be revalued during the period in which the new tax legislation is enacted. As such, during fiscal 2018 werevalued our net deferred tax liabilities to reflect the impact of the Tax Act and recorded a one-time benefit of $13.9 million. The accounting for the impact ofthe Tax Act was finalized during fiscal 2019 and there were no material adjustments to the estimates used under provisional accounting. Our effective tax ratefor fiscal 2018 was also impacted by the $39.1 million goodwill impairment charge which was recorded for book purposes but was not deductible for taxpurposes.The provisions for income taxes for fiscal 2019, 2018 and 2017 were as follows: 2019 2018 2017(In thousands) Federal — current $6,956 $7,024 $11,472State — current 2,748 1,834 2,546Total current 9,704 8,858 14,018 Federal — deferred (334) (14,393) (431)State — deferred (273) (364) (94)Total deferred (607) (14,757) (525)Total provision $9,097 $(5,899) $13,493 Reconciliations of the provisions for income taxes to the applicable federal statutory income tax rate for fiscal 2019, 2018 and 2017 are listed below. 2019 2018 2017Statutory federal income tax 21.0 % 31.5 % 35.0 %State income taxes, net of federal deduction 5.8 % (8.3)% 4.8 %ESOP dividend deduction on allocated shares (0.3)% 1.4 % (0.7)%Domestic production deduction — % 2.7 % (1.5)%Goodwill impairment — % (81.7)% — %Revaluation of net deferred tax liabilities — % 92.5 % — %Other — net 0.6 % 1.0 % (0.2)%Total 27.1 % 39.1 % 37.4 % The tax effects of items comprising our net deferred tax liability as of March 31, 2019 and April 1, 2018 are as follows:41HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)(In thousands) 2019 2018Deferred tax assets: Trade receivables $167 $254Stock compensation accruals 654 593Pension withdrawal liability 1,525 1,611Other 1,853 1,619Total deferred tax assets $4,199 $4,077Deferred tax liabilities: Inventories $(3,272) $(3,047)Prepaid expenses (764) (756)Excess of tax over book depreciation (10,000) (9,811)Intangible assets (16,718) (17,625)Unrealized gain on interest rate swap (118) (221)Total deferred tax liabilities $(30,872) $(31,460)Net deferred tax liabilities $(26,673) $(27,383)As of March 31, 2019, the Company has determined that it is more likely than not that the deferred tax assets at March 31, 2019 will be realized eitherthrough future taxable income or reversals of taxable temporary differences.During fiscal 2016, we recorded a gross unrecognized tax benefit in other long-term liabilities on our consolidated balance sheet as a result of uncertainincome tax positions taken by Stauber Performance Ingredients (“Stauber”) on its tax returns for periods prior to our acquisition. We had no unrecognized taxbenefits prior to the Stauber acquisition. The Stauber acquisition agreement provides the Company with indemnification from the prior owners for any taxliabilities relating to pre-acquisition tax returns. Accordingly, we also recorded an offsetting, long-term receivable, and as such any change in theunrecognized tax benefit will not impact our effective tax rate in future periods. During fiscal 2019, 2018 and 2017, the unrecognized tax benefit and theoffsetting receivable were reduced to $0.1 million, $0.2 million and $0.8 million, respectively, due to the expiration of the statute of limitations for certain ofthe taxable periods. We expect these uncertain income tax amounts to decrease through September 2019 as the applicable examination periods for therelevant taxing authorities expire.We are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The tax years prior to our fiscal year ended April 3, 2016 areclosed to examination by the Internal Revenue Service, and with few exceptions, state and localincome tax jurisdictions.Note 14 — Segment InformationWe have three reportable segments: Industrial, Water Treatment and Health and Nutrition. The accounting policies of the segments are the same as thosedescribed in the summary of significant accounting policies. Product costs and expenses for each segment are based on actual costs incurred along with costallocations of shared and centralized functions.We evaluate performance based on profit or loss from operations before income taxes not including nonrecurring gains and losses. Reportable segments aredefined primarily by product and type of customer. Segments are responsible for the sales, marketing and development of their products and services. Otherthan our Health and Nutrition segment, the segments do not have separate accounting, administration, customer service or purchasing functions. There are nointersegment sales and no operating segments have been aggregated.42HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Reportable Segments Industrial WaterTreatment Health andNutrition Total(In thousands) Fiscal Year Ended March 31, 2019: Sales $281,860 $149,490 $124,976 $556,326Gross profit 34,900 37,986 23,050 95,936Selling, general, and administrative expenses 22,759 19,498 16,861 59,118Operating income 12,141 18,488 6,189 36,818Identifiable assets* $162,926 $58,274 $146,042 $367,242 Capital expenditures $7,319 $4,506 $793 $12,618Fiscal Year Ended April 1, 2018: Sales $247,374 $138,465 $118,330 $504,169Gross profit 29,619 36,268 20,873 86,760Selling, general, and administrative expenses 21,159 19,426 18,818 59,403Goodwill impairment — — 39,116 39,116Operating income (loss) 8,460 16,842 (37,061) (11,759)Identifiable assets* $165,052 $58,513 $153,123 $376,688 Capital expenditures $10,265 $7,228 $2,210 $19,703Fiscal Year Ended April 2, 2017: Sales $238,555 $128,954 $116,084 $483,593Gross profit 38,886 35,962 23,225 98,073Selling, general, and administrative expenses 21,818 19,798 17,765 59,381Operating income 17,068 16,164 5,460 38,692Identifiable assets* $159,032 $53,445 $192,047 $404,524 Capital expenditures $10,529 $7,777 $3,310 $21,616 * Unallocated assets, consisting primarily of cash and cash equivalents, investments and prepaid expenses, were $18.4 million at March 31, 2019, $14.3million at April 1, 2018 and $13.1 million at April 2, 2017.43HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Note 15 — Selected Quarterly Financial Data (Unaudited) (In thousands, except per share data) Fiscal 2019 First Second Third FourthSales $149,800 $145,324 $128,151 $133,051Gross profit 28,457 25,772 21,033 20,674Selling, general, and administrative expenses 14,979 14,941 14,312 14,886Operating income 13,478 10,831 6,721 5,788Net income 9,123 7,409 4,130 3,771Basic earnings per share $0.86 $0.69 $0.39 $0.35Diluted earnings per share $0.85 $0.69 $0.39 $0.35 Fiscal 2018 First Second Third FourthSales $133,731 $125,395 $118,053 $126,990Gross profit 25,999 24,115 18,840 17,806Selling, general, and administrative expenses 15,766 14,828 14,139 14,670Goodwill impairment — — — 39,116Operating income (loss) 10,233 9,287 4,701 (35,980)Net income (loss) 5,831 5,210 17,143 (37,361)Basic earnings (loss) per share $0.55 $0.49 $1.62 $(3.51)Diluted earnings (loss) per share $0.55 $0.49 $1.61 $(3.50)44ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.ITEM 9A. CONTROLS AND PROCEDURESEvaluation of Disclosure Controls and ProceduresAs of the end of the period covered by this Annual Report on Form 10-K, we conducted an evaluation, under supervision and with the participation ofmanagement, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls andprocedures pursuant to Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Based upon that evaluation, our chief executive officer and chief financial officerconcluded that our disclosure controls and procedures are effective. Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of theExchange Act as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the SEC underthe Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls andprocedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed under theExchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or person performingsimilar functions, as appropriate to allow timely decisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Ourinternal control over financial reporting includes those policies and procedures that (1) pertain to maintenance of records that, in reasonable detail, accuratelyand fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of the financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being madeonly in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of theeffectiveness of internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changesin conditions, or that the degree of compliance with the policies or procedures may deteriorate.Management assessed the effectiveness of our internal control over financial reporting as of March 31, 2019, based on the criteria described in InternalControl - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment,management believes that our internal control over financial reporting was effective as of March 31, 2019.Our independent registered public accounting firm has issued an attestation report on our internal control over financial reporting for March 31, 2019 whichis included in the Report of Independent Registered Public Accounting Firm in Item 8 of this Annual Report on 10-K.Attestation Report of Registered Public Accounting FirmThe attestation report required under this Item 9A is contained in Item 8 of this Annual Report on 10-K under the caption “Report of Independent RegisteredPublic Accounting Firm.”Changes in Internal Control ProceduresThere was no change in our internal control over financial reporting during the fourth quarter of fiscal 2019 that has materially affected, or is reasonablylikely to materially affect, our internal control over financial reporting. 45ITEM 9B. OTHER INFORMATIONNone.46PART IIICertain information required by Part III is incorporated by reference from Hawkins’ definitive Proxy Statement for the Annual Meeting of Shareholders to beheld on August 2, 2018 (the “2019 Proxy Statement”). Except for those portions specifically incorporated in this Form 10-K by reference to the 2019 ProxyStatement, no other portions of the 2019 Proxy Statement are deemed to be filed as part of this Form 10-K.ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCEOur current executive officers, their ages and offices held, are set forth below:Name Age OfficePatrick H. Hawkins 48 Chief Executive Officer and PresidentJeffrey P. Oldenkamp 46 Vice President, Chief Financial Officer, and TreasurerRichard G. Erstad 55 Vice President, General Counsel and SecretaryDrew M. Grahek 49 Vice President — OperationsThomas J. Keller 59 Vice President — Water Treatment GroupTheresa R. Moran 56 Vice President — Purchasing, Logistics and Sales SupportShirley A. Rozeboom 57 Vice President — Health and NutritionJohn R. Sevenich 61 Vice President — Industrial GroupPatrick H. Hawkins has been our Chief Executive Officer and President and member of our board since March 2011. Mr. Hawkins has held the position ofPresident since March 2010. He joined the Company in 1992 and served as the Business Director - Food and Pharmaceuticals, a position he held from 2009to 2010. Previously he served as Business Manager - Food and Co-Extrusion Products from 2007 to 2009 and Sales Representative - Food Ingredients from2002 to 2007. He previously served the Company in various other capacities, including Plant Manager, Quality Director and Technical Director.Jeffrey P. Oldenkamp joined Hawkins in May 2017 and assumed the role of Chief Financial Officer, Vice President and Treasurer in June 2017. Prior tojoining Hawkins, Mr. Oldenkamp was with MTS Systems Corporation, a supplier of high-performance test systems and sensors, where he served as ChiefFinancial Officer since January 2015 and Vice President of Finance for the MTS Test business from January 2014 to January 2015, and with Nilfisk-Advance,Inc., a global manufacturer of professional cleaning equipment, where he served as Americas Operations Chief Financial Officer and Vice President fromJanuary 2012 to January 2014.Richard G. Erstad has been our Vice President, General Counsel and Secretary since November 2008. Mr. Erstad was General Counsel and Secretary ofBUCA, Inc., a restaurant company, from 2005 to 2008. Mr. Erstad had previously been an attorney with the corporate group of Faegre & Benson LLP, a lawfirm, from 1996 to 2005, where his practice focused on securities law and mergers and acquisitions. He is a member of the Minnesota Bar.Drew M. Grahek has been our Vice President - Operations since September 2018. Prior to joining Hawkins, Mr. Grahek was Adjunct Faculty at the Universityof Minnesota College of Continuing Education and a Business Administrator in the Archdiocese of St. Paul and Minneapolis from 2017 to 2018; Director ofService Operations and Supply Chain with Ulta Beauty, Inc. from 2016 to 2017; and Director of Stores with Field and Stream Outdoor Stores, a division ofDick’s Sporting Goods, Inc. from 2015 to 2016. Previously, he spent a total of 23 years at Target Corporation in a variety of operations, merchandising andproperty management positions. Thomas J. Keller has been our Vice President - Water Treatment Group since April 2012. Prior to attaining this position, Mr. Keller held various positionssince joining the Company in 1980, most recently as its Water Treatment General Manager, a position he held since June 2011. Previously, Mr. Keller servedas a Regional Manager of the Water Treatment Group from 2002 to 2011.Theresa R. Moran has been our Vice President - Purchasing, Logistics and Sales Support since June 2017. Since joining the Company in 1981, Ms. Moranhas served the Company in a variety of positions, including Administration Operations Manager from 1999 to 2007, Director - Process Improvement from2007 until 2010 and most recently as Vice President - Quality and Support, a position she held from 2010 until her current role.47Shirley A. Rozeboom was named Vice President - Health and Nutrition in April 2019. Ms. Rozeboom had held the position of Senior Vice President of Salesfor Stauber since 2012. Previously, she held the positions of Director of Sales at Stauber from 2008 to 2012 and Account Executive from 2000 to 2008.John R. Sevenich has been our Vice President - Industrial Group since May 2000. Mr. Sevenich was the Business Unit Manager of Manufacturing from 1998to 2000 and was a Sales Representative with the Company from 1989 to 1998.The disclosure under the headings “Election of Directors,” “Corporate Governance,” and, if applicable, “Delinquent Section 16(a) Reports” of the 2019Proxy Statement is incorporated herein by reference.We have adopted a Code of Business Conduct and Ethics that applies to all of our directors and employees, including our principal executive officer,principal financial officer, controller and other persons performing similar functions. We have posted the Code of Business Conduct and Ethics on ourwebsite located at http://www.hawkinsinc.com. Hawkins’ Code of Business Conduct and Ethics is also available in print to any shareholder who requests it inwriting from our Corporate Secretary. We intend to post on our website any amendment to, or waiver from, a provision of our Code of Business Conduct andEthics that applies to our principal executive officer, principal financial officer, controller and other persons performing similar functions within fourbusiness days following the date of such amendment or waiver. We are not including the information contained on our website as part of, or incorporating itby reference into, this report.ITEM 11. EXECUTIVE COMPENSATION“Compensation of Executive Officers and Directors” of the 2019 Proxy Statement is incorporated herein by this reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSThe disclosure under the headings “Security Ownership of Management and Beneficial Ownership” and “Equity Compensation Plan Information” of the2019 Proxy Statement is incorporated herein by this reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe disclosure under the headings “Election of Directors” and “Related Party Transactions” of the 2019 Proxy Statement is incorporated herein by thisreference. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESThe disclosure under the heading “Independent Registered Public Accounting Firm’s Fees” of the 2019 Proxy Statement is incorporated herein by thisreference.48PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES(a)(1) FINANCIAL STATEMENTS OF THE COMPANY The following financial statements of Hawkins, Inc. are filed as part of this Annual Report on Form 10-K: Report of Independent Registered Public Accounting Firm. Consolidated Balance Sheets at March 31, 2019 and April 1, 2018. Consolidated Statements of Income for the fiscal years ended March 31, 2019, April 1, 2018 and April 2, 2107. Consolidated Statements of Comprehensive Income for the fiscal years ended March 31, 2019, April 1, 2018 and April 2, 2017. Consolidated Statements of Shareholders’ Equity for the fiscal years ended March 31, 2019, April 1, 2018 and April 2, 2017. Consolidated Statements of Cash Flows for the fiscal years ended March 31, 2019, April 1, 2018 and April 2, 2017. Notes to Consolidated Financial Statements. (a)(2) FINANCIAL STATEMENT SCHEDULES OF THE COMPANY The additional financial data listed below is included as a schedule to this Annual Report on Form 10-K and should be read inconjunction with the financial statements presented in Part II, Item 8. Schedules not included with this additional financial data havebeen omitted because they are not required, or the required information is included in the financial statements or the notes. The following financial statement schedule for the fiscal years 2019, 2018 and 2017. Schedule II — Valuation and Qualifying Accounts. (a)(3) EXHIBITS 49Exhibit IndexUnless otherwise indicated, all documents incorporated into this Annual Report on Form 10-K by reference to a document filed with the SEC arelocated under file number 0-7647. Exhibit Description Method of Filing 3.1 Amended and Second Restated Articles of Incorporation.(1) Incorporated byReference 3.2 Amended and Restated By-Laws.(2) Incorporated byReference 4.1 Description of Securities Filed Electronically 10.1* Hawkins, Inc. 2010 Omnibus Incentive Plan.(3) Incorporated byReference 10.2* Form of Performance-Based Unit Award Notice and Restricted Stock Agreement under theCompany’s 2010 Omnibus Incentive Plan.(4) Incorporated byReference 10.3* Form of Restricted Stock Agreement under the Company’s 2010 Omnibus Incentive Plan.(5) Incorporated byReference 10.4* Hawkins, Inc. Executive Severance Plan.(6) Incorporated byReference 10.5 Commitment Letter, dated November 23, 2015, by and among the Company, U.S.BankNational Association, and JP Morgan Chase Bank, N.A. (7) Incorporated byReference 10.6 Credit Agreement dated as of December 23, 2015 among the Company, U.S. Bank NationalAssociation, and certain financial institutions.(8) Incorporated byReference 10.7 Employee Stock Purchase Plan, as amended. (9) Incorporated byReference 10.80 Amended and Restated Credit Agreement, dated as of November 30, 2018, among theCompany, U.S. Bank National Association, and certain financial institutions. (10) Incorporated byReference21 Subsidiaries of the registrant (11) Incorporated byReference 23.1 Consent of Independent Registered Public Accounting Firm. Filed Electronically 31.1 Certification by Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act. Filed Electronically 31.2 Certification by Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act. Filed Electronically 32.1 Section 1350 Certification by Chief Executive Officer. Filed Electronically 32.2 Section 1350 Certification by Chief Financial Officer. Filed Electronically 101 Financial statements from the Annual Report on Form 10-K of Hawkins, Inc. for the periodended March 31, 2019, filed with the SEC on May 23, 2019, formatted in Extensible BusinessReporting Language (XBRL): (i) the Consolidated Balance Sheets at March 31, 2019 and April1, 2018, (ii) the Consolidated Statements of Income for the fiscal years ended March 31, 2019,April 1, 2018, and April 2, 2017, (iii) the Consolidated Statements of Comprehensive Incomefor the fiscal years ended March 31, 2019, April 1, 2018, and April 2, 2017, (iv) theConsolidated Statements of Shareholders’ Equity for the fiscal years ended March 31, 2019,April 1, 2018, and April 2, 2017, (v) Consolidated Statements of Cash Flows for the fiscal yearsended March 31, 2019, April 1, 2018, and April 2, 2017, and (iv) Notes to ConsolidatedFinancial Statements. Filed Electronically*Management contract or compensation plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K.(1)Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010.(2)Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated October 28, 2009 and filed November 3, 2009.(3)Incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-8 filed June 6, 2011 (file no. 333-174735).(4)Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010.(5)Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010.(6)Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended July 3, 2011.(7)Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated November 23, 2015(8)Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 23, 2015.(9)Incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 filed November 2, 2018 (File no. 333-228128).(10)Incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form 8-K filed December 3, 2018 (File no. 000-07647).(11)Incorporated by reference to Exhibit 21 to the Company’s Annual Report on Form 10-K filed May 31, 2018 (File no. 000-07647),ITEM 16. FORM 10-K SUMMARYNoneSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. HAWKINS, INC. Date:May 23, 2019 By /s/ Patrick H. Hawkins Patrick H. Hawkins,Chief Executive Officer and PresidentPursuant to the requirements of the Securities Exchange Act of 1934, this report has also been signed below by the following persons on behalf ofthe Company and in the capacities indicated on the date set forth beside their signature. /s/ Patrick H. Hawkins Date:May 23, 2019Patrick H. Hawkins, Chief Executive Officer andPresident (Principal Executive Officer) and Director /s/ Jeffrey P. Oldenkamp Date:May 23, 2019Jeffrey P. Oldenkamp, Vice President, Chief Financial Officer,and Treasurer (Principal Financial Officer and PrincipalAccounting Officer) /s/ John S. McKeon Date:May 23, 2019John S. McKeon, Director, Chairman of the Board /s/ Daniel J. Stauber Date:May 23, 2019Daniel J. Stauber, Director /s/ Duane M. Jergenson Date:May 23, 2019Duane M. Jergenson, Director /s/ James A. Faulconbridge Date:May 23, 2019James A. Faulconbridge, Director /s/ James T. Thompson Date:May 23, 2019James T. Thompson, Director /s/ Jeffrey L. Wright Date:May 23, 2019Jeffrey L. Wright, Director /s/ Mary J. Schumacher Date:May 23, 2019Mary J. Schumacher, Director SCHEDULE IIHAWKINS, INC.VALUATION AND QUALIFYING ACCOUNTSFOR THE FISCAL YEARS ENDED MARCH 31, 2019, APRIL 1, 2018 AND APRIL 2, 2017 Additions Description Balance atBeginningof Year Charged toCosts andExpenses Charged toOtherAccounts DeductionsWrite-Offs Balance atEnd of Year (In thousands)Reserve deducted from asset to which itapplies: Fiscal Year Ended March 31, 2019: Allowance for doubtful accounts 942 $92 $— $414 620Fiscal Year Ended April 1, 2018: Allowance for doubtful accounts $468 $509 $— $35 $942Fiscal Year Ended April 2, 2017: Allowance for doubtful accounts $602 $79 $— $213 $468Exhibit 4.1DESCRIPTION OF CAPITAL STOCKThe following description of the common shares of Hawkins, Inc. (the “Company”) does not purport to be complete and is subject to and qualified byreference to the Company’s Amended and Restated Articles of Incorporation (the “Articles”) and Amended and Restated By‑Laws (the “Bylaws”) andapplicable law.Authorized CapitalThe Company is authorized to issue up to 30,000,000 shares, with a par value of $.05 per share (the “common shares”). The common shares may be allotted asand when the Company’s Board of Directors (the “Board”) shall determine, and, under and pursuant to the laws of the State of Minnesota, the Board has thepower to fix or alter, from time to time, in respect to shares then unallotted, any or all of the following: the dividend rate; the redemption price; theliquidation price; the conversion rights and the sinking or purchase fund rights of shares of any class, or of any series of any class.Voting RightsEach common share entitles the holder to one vote for all purposes and cumulative voting is not permitted in the election of directors. Significant corporatetransactions, such as amendments to the Articles, mergers, sales of assets and dissolution or liquidation, require approval by the affirmative vote of themajority of the outstanding common shares. Other matters to be voted upon by the holders of common shares normally require the affirmative vote of amajority of the shares present at the particular shareholders meeting.Dividends and Other DistributionsHolders of the common shares are entitled to receive dividends in the form of cash, property or shares of capital stock of the Company, when and as declaredby the Board, provided there are sufficient earnings or surplus legally available for that purpose. All of the issued and outstanding common shares arenonassessable.No Preemptive RightsThere are no preemptive, subscription, conversion, redemption or sinking fund rights pertaining to the common shares. The absence of preemptive rightscould result in a dilution of the interest of investors should additional common shares be issued.Liquidation RightsCommon shares are entitled to share ratably in all of the Company’s assets available for distribution upon liquidation, dissolution or winding up of the affairsof the Company.Warrants and Other RightsAs of March 31, 2019, performance-based restricted stock units representing the potential issuance of up to 69,252 common shares in the aggregate wereoutstanding. All such equity-based awards are governed by the Hawkins, Inc. 2010 Omnibus Incentive Plan. As of the same date, an additional 692,700shares remained available for future awards under the plan.As of the same date, no options, warrants or other rights to purchase common shares were outstanding.Anti-Takeover ProvisionsCertain provisions of Minnesota law described below could have anti-takeover effects. These provisions are intended to provide management flexibility andto enhance the likelihood of continuity and stability in the composition of the Board and in the policies formulated by the Board and to discourage anunsolicited takeover of the Company, if the Board determines that such a takeover is not in the best interests of the Company and its shareholders. However,these provisions could have the effect of discouraging certain attempts to acquire the Company that could deprive shareholders of opportunities to sell theircommon shares at prices higher than prevailing market prices.Section 302A.671 of the Minnesota Business Corporation Act applies, with certain exceptions, to any acquisition of the Company’s voting stock (from aperson other than the Company and other than in connection with certain mergers and exchanges to which the Company is a party) resulting in the acquiringperson owning 20% or more of its voting stock then outstanding. Section 302A.671 requires approval of any such acquisitions by a majority vote of theCompany’s shareholders prior to consummation. In general, shares acquired in the absence of such approval are denied voting rights and are redeemable attheir then fair market value by the Company within thirty days after the acquiring person has failed to give a timely information statement to the Company orthe date the shareholders voted not to grant voting rights to the acquiring person’s shares.Section 302A.673 of the Minnesota Business Corporation Act generally prohibits the Company or any of its subsidiaries from entering into any transactionwith a shareholder under which the shareholder purchases 10% or more of the Company’s voting shares (an “interested shareholder”) within four yearsfollowing the date the person became an interested shareholder, unless the transaction is approved by a committee of all of the disinterested members of theBoard serving before the interested shareholder acquires the shares.In addition to the various Minnesota statutory provisions described above, certain provisions in the Articles and Bylaws could have an anti-takeover effect.The Articles provide that the holders of the common shares do not have cumulative voting rights. For the shareholders to call a special meeting, the Bylawsrequire that at least 10% of the voting power of the shareholders must join in the request and at least 25% of the voting power of the shareholders must join inthe request for a special meeting in the case of a special meeting called for the purpose of considering any action to directly or indirectly effect a businesscombination, including any action to change or otherwise affect the composition of the Board for that purpose. Furthermore, the Board has the power to issueany or all of the shares of undesignated common shares, including the authority to establish one or more series and to fix the powers, preferences, rights andlimitations of such class or series, without seeking shareholder approval, and the right to fill vacancies of the Board (including a vacancy created by anincrease in the Board).The Company’s Bylaws include an advance notice procedure for shareholder proposals to be brought before an annual meeting of shareholders, includingproposed nominations of candidates for election to the Board. Shareholders at an annual meeting will only be able to consider proposals or nominationsspecified in the notice of meeting or brought before the meeting by or at the direction of the Board, or by a shareholder that has delivered timely writtennotice in proper form to the Company’s secretary of the business to be brought before the meeting. These provisions could have the effect of delayingshareholder actions that may be favored by the holders of a majority of the Company’s outstanding voting securities until the next shareholder meeting, ormay discourage or deter a potential acquirer from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempt to obtain controlof the Company. Exhibit 23.1Consent of Independent Registered Public Accounting FirmThe Board of Directors of Hawkins, Inc.:We consent to the incorporation by reference in the registration statements on Form S-8 (Nos. 333-87582, 333-123080, 333-172761, 333-174735, and 333-228128) of our report dated May 23, 2019, with respect to the consolidated balance sheets of Hawkins, Inc. as of March 31, 2019 andApril 1, 2018, and the related consolidated statements of income (loss), comprehensive income (loss), shareholders’ equity, and cash flows for each of theyears in the three-year period ended March 31, 2019, and the related notes and financial statement schedule II (collectively, the consolidated financialstatements), and the effectiveness of internal control over financial reporting as of March 31, 2019, which report appears in the annual report on Form 10-K ofHawkins, Inc. for the fiscal year ended March 31, 2019./s/ KPMG LLPMinneapolis, MinnesotaMay 23, 2019Exhibit 31.1CERTIFICATION PURSUANT TOSECTION 302 OFTHE SARBANES-OXLEY ACT OF 2002CERTIFICATIONSI, Patrick H. Hawkins, certify that:1.I have reviewed this annual report on Form 10-K of Hawkins, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: May 23, 2019 /s/ Patrick H. Hawkins Patrick H. Hawkins Chief Executive Officer and PresidentExhibit 31.2CERTIFICATION PURSUANT TOSECTION 302 OFTHE SARBANES-OXLEY ACT OF 2002CERTIFICATIONSI, Jeffrey P. Oldenkamp, certify that:1.I have reviewed this annual report on Form 10-K of Hawkins, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: May 23, 2019 /s/ Jeffrey P. Oldenkamp Jeffrey P. Oldenkamp Vice President, Chief Financial Officer, and TreasurerExhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Hawkins, Inc. (the Company) on Form 10-K for the period ended March 31, 2019, as filed with the Securities andExchange Commission on the date hereof (the Report), I, Patrick H. Hawkins, Principal executive officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Patrick H. HawkinsPatrick H. HawkinsChief Executive Officer and PresidentMay 23, 2019Exhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Hawkins, Inc. (the Company) on Form 10-K for the period ended March 31, 2019, as filed with the Securities andExchange Commission on the date hereof (the Report), I, Jeffrey P. Oldenkamp, Principal financial and accounting officer of the Company, certify, pursuantto 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Jeffrey P. OldenkampJeffrey P. OldenkampVice President, Chief Financial Officer, and TreasurerMay 23, 2019

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