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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended April 2, 2023
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-7647
HAWKINS, INC.
(Exact Name of Registrant as Specified in its Charter)
Minnesota
(State of Incorpora on)
2381 Rosegate, Roseville, Minnesota
(Address of Principal Execu ve Offices)
41-0771293
(I.R.S. Employer Iden fica on No.)
55113
(Zip Code)
Title of each class
Common Shares, par value $.01 per share
(612) 331-6910
(Registrant’s Telephone Number, Including Area Code)
Securi es registered pursuant to Sec on 12(b) of the Act:
Trading Symbol:
HWKN
Securi es registered pursuant to Sec on 12(g) of the Act: None
Name of exchange on which registered:
Nasdaq Stock Market LLC
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securi es Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Sec on 13 or Sec on 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sec on 13 or 15(d) of the Securi es Exchange Act of 1934 during the
preceding twelve 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 past
90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submi ed electronically every Interac ve Data File required to be submi ed pursuant to Rule 405 of Regula on S-T
during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller repor ng company, or an emerging
growth company. See the defini ons of “large accelerated filer,” “accelerated filer,” “smaller repor ng company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer ☑
Non-accelerated filer ☐
Accelerated filer ☐
Smaller repor ng company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transi on period for complying with any new or revised
financial accoun ng standards provided pursuant to Sec on 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and a esta on to its management’s assessment of the effec veness of its internal control over
financial repor ng under Sec on 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accoun ng firm that prepared or issued its audit report.
☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
If securi es are registered pursuant to Sec on 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect
the correc on of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error correc ons are restatements that required a recovery analysis of incen ve-based compensa on received by any of
the registrant’s execu ve officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
The aggregate market value of vo ng stock held by non-affiliates of the Registrant on October 2, 2022 (the last business day of the Registrant’s most recently
completed second fiscal quarter) was approximately $787.1 million based upon the closing sale price for the Registrant’s common shares on that date as reported by The
Nasdaq Stock Market LLC, 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 12, 2023, the Registrant had 21,003,799 shares of common shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Por ons of our defini ve Proxy Statement for the annual mee ng of shareholders to be held August 2, 2023, are incorporated by reference in Part III of this Annual Report
on Form 10-K
FORWARD-LOOKING STATEMENTS
The informa on presented in this Annual Report on Form 10-K contains forward-looking statements within the meaning of Sec on 21E of the Securi es
Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements have been made pursuant to the provisions of the Private
Securi es Li ga on Reform Act of 1995. These statements are not historical facts, but rather are based on our current expecta ons, es mates and
projec ons, and our beliefs and assump ons. Words such as “an cipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “es mate,” “will” and similar
expressions may iden fy forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks,
uncertain es and other factors, some of which are beyond our control and are difficult to predict. These factors could cause actual results to differ
materially from those expressed or forecasted in the forward-looking statements. These risks and uncertain es are described in the risk factors and
elsewhere in this Annual Report on Form 10-K. We cau on you not to place undue reliance on these forward-looking statements, which reflect our
management’s view only as of the date of this Annual Report 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 circumstances a er the date of this Annual Report on Form 10-K or to reflect the occurrence of
unan cipated 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 2024" means our fiscal year ending March 31, 2024, “fiscal 2023” means our fiscal year ended
April 2, 2023, “fiscal 2022” means our fiscal year ended April 3, 2022, and “fiscal 2021” means our fiscal year ended March 28, 2021.
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Hawkins, Inc.
Annual Report on Form 10-K
For the Fiscal Year Ended April 2, 2023
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
ITEM 9C.
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
Business
Risk Factors
Unresolved Staff Comments
Proper es
Legal Proceedings
Mine Safety Disclosures
PART I
PART II
Market for the Company’s Common Equity, Related Shareholder Ma ers, and Issuer Purchases of Equity Securi es
Reserved
Management’s Discussion and Analysis of Financial Condi on and Results of Opera ons
Quan ta ve and Qualita ve Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accoun ng and Financial Disclosure
Controls and Procedures
Other Informa on
Disclosure Regarding Foreign Jurisdic ons That Prevent Inspec ons
PART III
Directors, Execu ve Officers, and Corporate Governance
Execu ve Compensa on
Security Ownership of Certain Beneficial Owners and Management And Related Stockholder Ma ers
Certain Rela onships and Related Transac ons, and Director Independence
Principal Accountant Fees and Services
ITEM 15.
ITEM 16.
Exhibits and Financial Statement Schedules
Form 10-K Summary
PART IV
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ITEM 1. BUSINESS
PART I
We are a leading specialty chemical and ingredients company that formulates, distributes, blends and manufactures products for our Industrial, Water
Treatment and Health and Nutri on customers. We believe that we create value for our customers through superb service and support, quality products,
personalized applica ons and trustworthy, crea ve employees.
We conduct our business in three segments: Industrial, Water Treatment, and Health and Nutri on.
Industrial Segment. Our Industrial Group specializes in providing industrial chemicals, products and services to industries such as agriculture, chemical
processing, electronics, energy, food, pharmaceu cal and pla ng. This group’s principal products are acids, alkalis and food-grade and pharmaceu cal
salts and ingredients.
The Industrial Group:
• Manufactures sodium hypochlorite (bleach), certain food-grade and pharmaceu cal products, including liquid phosphates, lactates and other
blended products, and agricultural products;
• Receives, stores and distributes various chemicals in bulk quan es, including liquid caus c soda, sulfuric acid, hydrochloric acid, urea, phosphoric
acid, aqua ammonia and potassium hydroxide;
• Repackages water treatment chemicals for our Water Treatment Group and bulk industrial chemicals to sell in smaller quan es to our customers;
and
• Performs custom blending of chemicals according to customer formulas and specifica ons.
The group’s sales are concentrated primarily in the central United States, while the group’s products sold into the food and pharmaceu cal markets are
sold na onally. The Industrial Group relies on a specially trained sales staff that works directly with customers on their specific needs. The group conducts
its business primarily through manufacturing loca ons and terminal opera ons. Agricultural sales within this group tend to be seasonal, with higher sales
due to the applica on of fer lizer during the typical plan ng season of March through June given the regions of the country we serve.
Water Treatment Segment. Our Water Treatment Group specializes in providing chemicals, products, equipment, services and solu ons for potable
water, municipal and industrial wastewater, industrial process water, non-residen al swimming pool water and agricultural water. This group has the
resources and flexibility to treat systems ranging in size from a single small well to a mul -million-gallon-per-day facility.
The group u lizes delivery routes operated by our employees who typically serve as route driver, salesperson and trained technician to deliver our
products and diagnose our customers’ water treatment needs. We believe that the high level of service provided by these individuals allows us to serve as
the trusted water treatment expert for many of the municipali es and other customers that we serve. We also believe that there are significant synergies
between our Water Treatment and Industrial Groups in that we are able to obtain a compe ve cost posi on on many of the chemicals sold by the Water
Treatment Group due to the volumes of these chemicals purchased by our Industrial Group. In addi on, our Industrial and Water Treatment groups share
certain resources, which leverage fixed costs across both groups.
The Water Treatment group operates out of 39 warehouses supplying products and services to customers primarily in the central United States,
throughout the Mississippi River watershed and along the southern United States from Texas to Florida. We expect to invest in exis ng and new branches
to expand the group’s geographic coverage. Our Water Treatment Group has historically experienced higher sales during April to September, primarily due
to a seasonal increase in chemicals used by municipal water treatment facili es.
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Health and Nutri on Segment. Our Health and Nutri on Group specializes in providing ingredient distribu on, processing and formula on solu ons to
manufacturers of nutraceu cal, func onal food and beverage, personal care, dietary supplement and other nutri onal food, health and wellness
products. This group offers a diverse product por olio including minerals, vitamins and amino acids, excipients, joint products, botanicals and herbs,
sweeteners and enzymes.
The Health and Nutri on Group relies on a specially trained sales staff that works directly with customers on their specific needs. The group’s extensive
product por olio combined with value-added services, including product formula on, sourcing and distribu on, and processing and blending, posi ons
this group as a one-stop ingredient solu ons provider to its customers. The group also follows rigorous quality control and compliance processes to
provide reliable, high-quality products to its customers. The group operates out of facili es in California and New York and its products are sold na onally
and, in certain cases, interna onally.
Raw Materials. We have numerous suppliers, including many of the major chemical producers in the United States. We source our health and nutri on
ingredients from a wide array of domes c and interna onal vendors. We typically have distributorship agreements or supply contracts with our suppliers
that are periodically renewed. We believe that most of the products we purchase can be obtained from alterna ve sources should exis ng rela onships
be terminated. We are dependent upon the availability of our raw materials. While we believe that we have adequate sources of supply for our raw
material and product requirements, we cannot be sure that supplies will be consistently available in the future. In the event that certain raw materials
become generally unavailable, suppliers may extend lead mes or limit or cut off the supply of materials to us. As a result, we may not be able to supply
or manufacture products for our customers.
Intellectual Property. Our intellectual property por olio is of economic importance to our business. When appropriate, we have pursued, and we will
con nue to pursue, patents covering our products. We have also obtained certain trademarks for our products to dis nguish them from our compe tors’
products. We regard many of the formulas, informa on and processes that we generate and use in the conduct of our business as proprietary and
protectable under applicable copyright, patent, trademark, trade secret and unfair compe on laws.
Customer Concentra on. In fiscal 2023, none of our customers accounted for 10% or more of our total sales.
Compe on. We operate in a compe ve industry and compete with many producers, distributors and sales agents offering products equivalent to
substan ally all of the products we offer. Many of our compe tors are larger than we are and may have greater financial resources, although no one
compe tor is dominant in all of the markets we serve. We compete by offering quality products with outstanding customer service at compe ve prices
coupled with value-added services or product formula on where needed. Because of our long-standing rela onships with many of our suppliers, we are
o en able to leverage those rela onships to obtain products when supplies are limited or to obtain compe ve pricing.
Working Capital. Due to the nature of our opera ons, which includes purchases of large quan es of bulk chemicals, the ming of purchases can result in
significant changes in working capital and the resul ng opera ng cash flow. Historically, our cash requirements for working capital increase during the
period from March through November as caus c soda inventory levels increase with most of our barges received during this period.
Regulatory Ma ers. We are subject to numerous federal, state and local environmental, health and safety laws and regula ons in the jurisdic ons in
which we operate, including laws and regula ons rela ng to the management, storage, transporta on and disposal of chemicals and wastes; product
regula on; air water and soil contamina on; and the inves ga on and cleanup of any spills or releases that may result from our management, handling,
storage, sale, or transporta on of chemicals and other products. In addi on, societal concerns regarding the safety of chemicals in commerce and their
poten al impact on the environment have resulted in a growing trend towards increasing levels of product safety and environmental protec on
regula ons. These concerns have led to, and could con nue to result in, more stringent regulatory interven on by governmental authori es.
In addi on, we operate a fleet of more than 250 commercial vehicles, primarily in our Water Treatment Group, which are highly regulated, including by
the U.S. Department of Transporta on (“DOT”). The DOT governs transporta on ma ers including authoriza on to engage in motor carrier service,
including the necessary permits to conduct our businesses, equipment opera on, and safety.
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The manufacture, packaging, labeling, adver sing, promo on, distribu on and sale of our agricultural, food, pharmaceu cal, pes cide and health and
nutri on products are subject to regula on by numerous na onal and local governmental agencies in the United States and other countries. The primary
regulatory bodies in the United States are the Food and Drug Administra on (the “FDA”), the Environmental Protec on Agency, the United States
Department of Agriculture and the Federal Trade Commission, and we are also subject to similar regulators in other countries. In par cular, the FDA’s
current good manufacturing prac ces (“GMPs”) describe policies and procedures designed to ensure that nutraceu cals, pharmaceu cals and dietary
supplements are produced in a quality manner, do not contain contaminants or impuri es, and are accurately labeled and cover the manufacturing,
packaging, labeling and storing of supplements, with requirements for quality control, design and construc on of manufacturing plants, tes ng of
ingredients and final products, record keeping, and complaints processes.
Further informa on related to government regula on applicable to our business is included in this Annual Report on Form 10-K, in Part I, Item 1A - Risk
Factors.
Human Capital. Our team is a key to our success and we are commi ed to crea ng a workplace that a racts top talent, develops leaders and drives
performance on behalf of our customers and shareholders.
We strive to recruit the best people for the job regardless of race, color, na onality, gender, age, disability, sexual orienta on or any other status
protected by law. It is our policy to comply fully with all applicable laws rela ng to discrimina on in the workplace and are commi ed to advancing an
inclusive, collabora ve and respec ul culture.
The health and safety of our employees is our highest priority. We work to ensure our employees have a thorough understanding of health and safety
precau ons that need to be taken in all business func ons. Specific safety ini a ves include accident preven on work, improving process controls, safety
training, safety commi ees, safety audits, incident inves ga on and improvement measures.
We strive to provide employees with compe ve wages commensurate with their skill levels, experience, knowledge and the regional market. Full- me
employees are eligible for health, dental and vision insurance, paid and unpaid leaves, 401(K) plan, re rement plans, life and disability/accident coverage
and our employee assistance program.
As of April 2, 2023, we had 851 employees across the United States, of which 846 were full- me employees,. Approximately 40% of our employees were
female or racially and ethnically diverse, and approximately 11% were covered by a collec ve bargaining agreement. Of the eight members of our Board
of Directors, two are female, six are male, one is Asian American and seven are white.
Available Informa on. Our Internet address is www.hawkinsinc.com. We have made available, free of charge, our Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports, as soon as reasonably prac cable a er
we electronically file these materials with, or furnish them to, the Securi es and Exchange Commission ("SEC"). Reports of beneficial ownership filed by
our directors and execu ve officers pursuant to Sec on 16(a) of the Exchange Act are also available on our website. We are not including the informa on
contained on our website as part of, or incorpora ng it by reference into, this Annual Report on Form 10-K. The SEC also maintains an internet site that
contains reports, proxy and informa on statements, and other informa on regarding our company at h p://www.sec.gov.
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ITEM 1A. RISK FACTORS
You should carefully consider the following material factors regarding risks rela ng to an investment in our securi es and when reading the informa on,
including the financial informa on, contained in this Annual Report on Form 10-K. Shareholders are cau oned that these and other factors may affect
future performance and cause actual results to differ materially from those that may be an cipated.
COMPETITIVE AND REPUTATIONAL RISKS
We operate in a highly compe ve environment and face significant compe on and price pressure.
We operate in a highly compe ve industry and compete with producers, manufacturers, distributors and sales agents offering products equivalent to
substan ally all of the products we offer. Compe on is based on several key criteria, including product price, product performance, product quality,
product availability and security of supply, breadth of product offerings, geographic reach, responsiveness of product development in coopera on with
customers, technical exper se and customer service. Many of our compe tors are larger than we are and may have greater financial resources, more
product offerings and a broader geographic reach. As a result, these compe tors may be able to offer a broader array of products to a larger geographic
area and may be be er able than us to withstand changes in condi ons within our industry, changes in the prices and availability of raw materials and
changes in general economic condi ons as well as be able to introduce innova ve products that reduce demand for or the profit from our products.
Addi onally, compe tors’ pricing decisions could compel us to decrease our prices, which could adversely affect our margins and profitability. Our ability
to maintain or increase our profitability would be dependent upon our ability to offset compe ve decreases in the prices and margins of our products by
improving produc on efficiency, inves ng in infrastructure to reduce freight costs, iden fying and selling higher margin products, providing higher levels
of technical exper se and customer service, and improving exis ng products through innova on and research and development. If we are unable to
maintain our profitability or compe ve posi on, we could lose market share to our compe tors and experience reduced profitability.
Our businesses expose us to poten al product liability claims and recalls, which could adversely affect our financial condi on and performance.
The repackaging, blending, mixing and distribu on of products by us, including chemical products and products used in food or food ingredients or with
medical, pharmaceu cal or dietary supplement applica ons, involve an inherent risk of exposure to product liability claims, product recalls, product
seizures and related adverse publicity, including, without limita on, claims for exposure to our products, spills or release of our products, personal
injuries, food-related claims and property damage or environmental claims. A product liability claim, judgment or recall against our customers could also
result in substan al and unexpected expenditures for us, affect consumer confidence in our products and divert management’s a en on from other
responsibili es. 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 con nue to maintain our exis ng insurance or obtain comparable insurance at a reasonable cost, if at all. A product recall or a par ally or
completely uninsured judgment against us could have a material adverse effect on our business, financial condi on and results of opera ons.
Changes in our customers’ needs or failure of our products to meet customers’ specifica ons could adversely affect our sales and profitability.
Our products are used for a broad range of applica ons by our customers. Changes in our customers’ product needs or processes, or reduc ons in
demand for their end products, may enable or require our customers to reduce or eliminate consump on of the products that we provide. Customers
may also find alterna ve materials or processes that no longer require our products. Consequently, it is important that we develop new products to
replace the sales of products that mature and decline in use.
Our products provide important performance a ributes to our customers’ products. If our products fail to meet the customers’ specifica ons or comply
with applicable laws or regula ons, perform in a manner inconsistent with the customers’ expecta ons or have a shorter useful life than required, a
customer could seek replacement of the product or damages for costs incurred as a result of the product failure. A successful claim or series of claims
against us could have a material adverse effect on our financial condi on and results of opera ons and could result in a loss of one or more customers.
Reduc ons in demand for our products could adversely affect our sales and financial results and result in facility closures.
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Adverse publicity or nega ve public percep on regarding par cular ingredients or products or the dietary supplement industry in general could
adversely affect the financial performance of those por ons of our business.
Purchasing decisions made by consumers of products that contain our ingredients may be affected by adverse publicity or nega ve public percep on
regarding par cular ingredients or products or the dietary supplement industry in general. This nega ve public percep on may include publicity regarding
the risks, efficacy, legality or quality of par cular ingredients or products in general or of other companies or our products or ingredients specifically.
Nega ve public percep on may also arise from regulatory inves ga ons, regardless of whether those inves ga ons involve us. We are highly dependent
upon consumers’ percep on of the safety and quality of products that contain our ingredients as well as similar products distributed by other companies.
Thus, the mere publica on of reports asser ng that such products may be harmful could have a material adverse effect on us, regardless of whether
these reports are scien fically supported. Publicity related to dietary supplements or food ingredients may also result in increased regulatory scru ny of
our industry. Adverse publicity may have a material adverse effect on our business, financial condi on, results of opera ons and cash flows.
Failure to adequately protect cri cal data and technology systems could materially affect our opera ons.
Informa on technology system failures, network disrup ons and breaches of data security due to internal or external factors including phishing or cyber-
a acks could disrupt our opera ons by causing delays or cancella on of customer orders, impede the manufacture or shipment of products or cause
standard business processes to become ineffec ve, resul ng in the uninten onal disclosure of informa on or damage to our reputa on. While we have
taken steps to address these concerns by implemen ng network security and internal control measures, including employee training, comprehensive
monitoring of our networks and systems, maintenance of backup and protec ve systems and disaster recovery and incident response plans, our
employees, systems, networks, products, facili es and services remain vulnerable to phishing a acks and cyber-assault, and, as such, there can be no
assurance that a system failure, network disrup on or data security breach will not have a material adverse effect on our business, financial condi on,
opera ng results or cash flows.
RISKS RELATED TO OUR INDUSTRY
Fluctua ons in the prices and availability of our raw materials, which may be cyclical in nature, could have a material adverse effect on our opera ons
and the margins we receive on sales of our products.
We experience regular and recurring fluctua ons in the pricing of our raw materials. Those fluctua ons can be significant and occur rapidly. The cyclicality
of commodity markets, such as the market for caus c soda, primarily results from changes in the balance between supply and demand and the level of
general economic ac vity. We cannot predict whether the markets for our raw materials will favorably impact or nega vely impact the margins we can
realize.
The prices we pay for our principal chemical raw materials generally lag the market prices of the underlying raw material. The cost of inventory we have
on hand, par cularly inventories of our bulk commodity chemicals where we have significant volumes stored at our facili es, generally will lag the current
market pricing of such inventory. The pricing within our supply contracts generally adjusts quarterly or monthly. While we a empt to maintain
compe ve pricing and stable margin dollars, the poten al variance in our cost of inventory from the current market pricing can cause significant
vola lity in our margins realized. We do not engage in futures or other deriva ves contracts to hedge against fluctua ons in future prices. We may enter
into sales contracts where the selling prices for our products are fixed for a period of me, exposing us to vola lity in raw materials prices that we acquire
on a spot market or short-term contractual basis. We a empt to pass commodity pricing changes to our customers, but we may be unable to or be
delayed in doing so. Our inability to pass through price increases or any limita on or delay in our passing through price increases could 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 may extend lead mes or limit or cut off supplies. As a result, we may not be able to supply or manufacture products for some or all of our
customers. Constraints on the supply or delivery of cri cal raw materials could disrupt our opera ons and adversely affect the performance of our
businesses.
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Demand for our products is affected by general economic condi ons and by the cyclical nature of many of the industries we serve, which could cause
significant fluctua ons in our sales volumes and results.
Demand for our products is affected by general economic condi ons. A decline in general economic or business condi ons in the industries served by our
customers could have a material adverse effect on our businesses. Although we sell to areas tradi onally considered non-cyclical, such as water
treatment, food products and health and nutri onal ingredients, many of our customers are in businesses that are cyclical in nature, such as the industrial
manufacturing and energy industries which include the ethanol and agriculture industries. Downturns in these industries could adversely affect our sales
and our financial results by affec ng demand for and pricing of our products.
Our business is subject to hazards common to chemical businesses, any of which could interrupt our produc on and adversely affect our results of
opera ons.
Our business is subject to hazards common to chemical manufacturing, blending, storage, handling and transporta on, including explosions, fires, severe
weather, natural disasters, mechanical failure, unscheduled down me, transporta on interrup ons, traffic accidents involving our delivery vehicles,
derailments, chemical spills, discharges or releases of toxic or hazardous substances or gases and other risks. These hazards could cause personal injury
and loss of life, severe damage to or destruc on of property and equipment, and environmental contamina on. In addi on, the occurrence of material
opera ng problems or the absence of personnel due to pandemics or other disasters at any of our facili es due to any of these hazards may make it
impossible for us to make sales to our customers and may result in a nega ve public or poli cal reac on. Many of our facili es are near significant
residen al popula ons which increases the risk of nega ve public or poli cal reac on should an environmental issue occur and could lead to adverse
zoning or other regulatory ac ons that could limit our ability to operate our business in those loca ons. Accordingly, these hazards and their
consequences could have a material adverse effect on our opera ons as a whole, including our results of opera ons and cash flows, both during and a er
the period of opera onal difficul es.
Environmental problems at any of our facili es could result in significant unexpected costs.
We are subject to federal, state and local environmental regula ons regarding the ownership of real property and the opera ons conducted on real
property. Under various federal, state and local laws, ordinances and regula ons, we may own or operate real property or may have arranged for the
disposal or treatment of hazardous or toxic substances at a property and, therefore, may become liable for the costs of removal or remedia on of certain
hazardous substances released on or in our property or disposed of by us, as well as certain other poten al 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, the presence of these hazardous or toxic substances. Further, future changes in environmental laws or regula ons may require addi onal
investment in capital equipment or the implementa on of addi onal compliance programs in the future. The cost of inves ga on, remedia on or
removal of such substances may be substan al.
In the conduct of our opera ons, we have handled and do handle materials that are considered hazardous, toxic or vola le under federal, state and local
laws. The poten al for the accidental release of such products cannot be completely eliminated. In addi on, we operate or own facili es located on or
near real property that was formerly owned and operated by others. These proper es 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 par es who are responsible for
contamina on may not have funds, or may not make funds available when needed, to pay remedia on costs imposed upon us jointly with them under
environmental laws and regula ons.
Our Water Treatment Group and our agricultural product sales within our Industrial Group are subject to seasonality and weather condi ons, which
could adversely affect our results of opera ons.
Our Water Treatment Group has historically experienced higher sales during April to September, primarily due to a seasonal increase in chemicals used by
municipal water treatment facili es. Our agricultural product sales within our Industrial Group are also seasonal, primarily corresponding with the
plan ng season. Demand in both of these areas is also affected by weather condi ons, as either higher or lower than normal precipita on or
temperatures may affect water usage and the ming and the amount of consump on of our products. We cannot assure you that seasonality or
fluctua ng weather condi ons will not have a material adverse effect on our results of opera ons.
6
OPERATIONAL RISKS
Disrup ons within our supply chain have nega vely impacted, and could con nue to nega vely impact, our produc on, financial condi on and results
of opera ons.
We have been, and could con nue to be, adversely affected by disrup ons within our supply chain and transporta on network. The raw materials we
need are transported by truck, rail, barge or ship by third-party providers. The costs of transpor ng our products or necessary raw materials could be
nega vely affected by factors outside of our control, including rail service interrup ons or rate increases, extreme weather events, tariffs, rising fuel costs
and capacity constraints. Over the last few years, unprecedented conges on in ocean shipping adversely impacted the reliability of our imported raw
materials, and transport driver shortages caused extended lead mes for domes c shipments. In addi on, rail shipments can be unreliable, with
significant delays in service and increased costs. The impacts of recent high-profile derailments could further degrade service levels and increase costs.
Significant delays or increased costs rela ng to transporta on could materially affect our financial condi on and results of opera ons.
Similar supply chain issues have impacted and could con nue to impact both our suppliers and our customers. The supply of our necessary raw materials
could be interrupted due to shortages of raw materials, effects of economic, poli cal or financial market condi ons on a supplier's opera ons, labor
disputes or weather condi ons affec ng products or shipments, transporta on disrup ons, natural disasters, outbreaks of disease, informa on system
disrup ons or other reasons beyond our control. Similar disrup ons at our customers could reduce demand for our products, reducing our sales and
profitability. Product shortages or delays in deliveries, along with other factors such as price infla on and higher transporta on costs, have also resulted in
price increases from our suppliers. We may be unable to pass these price increases on to our customers, which could erode our profit margins. These
supply chain constraints, increased product costs and infla onary pressures could con nue or escalate in the future, which would have an adverse impact
on our business and results of opera ons.
We are highly dependent upon transporta on infrastructure to ship and receive our products and delays in these shipments could adversely affect our
results of opera ons.
Although we maintain a number of owned trucks and trailers, we rely heavily upon transporta on provided by third par es (including common carriers,
barge companies, rail companies and trans-ocean cargo companies) to deliver products to us and to our customers. Our access to third-party
transporta on is not guaranteed, and we may be unable to transport our products in a mely manner, or at all, in certain circumstances, or at
economically a rac ve rates. Disrup ons in transporta on are common, are o en out of our control, and can happen suddenly and without warning. Rail
limita ons, such as limita ons in rail capacity, availability of railcars, workforce shortages, derailments, embargoes and adverse weather condi ons have
disrupted or delayed rail shipments in the past and could do so in the future. Barge shipments are delayed or impossible under certain circumstances,
including during mes of high or low water levels, when waterways are frozen and when locks and dams are inoperable. The availability and reliability of
truck transporta on has been nega vely impacted by a number of factors, including limited availability of qualified drivers and equipment, and limita ons
on drivers’ hours of service. The volumes handled by, and opera ng challenges at, ocean ports have at mes been vola le and can delay the receipt of
goods, or cause the cost of shipping goods to be more expensive. Our failure to ship or receive products in a mely and efficient manner could have a
material adverse effect on our financial condi on and results of opera ons.
If we are unable to retain key personnel or a ract 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 con nued service of, and on our ability to
a ract and retain, qualified management, scien fic, technical and support personnel. The unan cipated departure of key members of our management
team could have an adverse impact on our business.
7
We may not be able to successfully consummate future acquisi ons or disposi ons or integrate acquisi ons into our business, which could result in
unan cipated expenses and losses.
As part of our business growth strategy, we have acquired businesses and may pursue acquisi ons in the future. Our ability to pursue this strategy will be
limited by our ability to iden fy appropriate acquisi on candidates and our financial resources, including available cash and borrowing capacity. In
addi on, we may seek to divest of businesses that are underperforming or not core to our future business. The expense incurred in consumma ng
transac ons, the me it takes to integrate an acquisi on or our failure to integrate businesses successfully could result in unan cipated expenses and
losses. Furthermore, we may not be able to realize the an cipated benefits from acquisi ons.
The process of integra ng acquired opera ons into our exis ng opera ons may result in unforeseen opera ng difficul es and may require significant
financial resources that would otherwise be available for the ongoing development or expansion of exis ng opera ons. The risks associated with the
integra on of acquisi ons include poten al disrup on of our ongoing businesses and distrac on of management, unforeseen claims, liabili es,
adjustments, charges and write-offs, difficulty in conforming the acquired business’ standards, processes, procedures and controls with our opera ons,
and challenges arising from the increased scope, geographic diversity and complexity of the expanded opera ons.
Our businesses are subject to risks stemming from natural disasters or other extraordinary events outside of our control, which could interrupt our
produc on and adversely affect our results of opera ons.
Natural disasters have the poten al of interrup ng our opera ons and damaging our proper es, which could adversely affect our businesses. Flooding of
the Mississippi River has temporarily shi ed the Company’s terminal opera ons out of its buildings four mes since the spring of 2010, including most
recently the 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
interrup on to our opera ons in the future from such disasters.
Chemical-related assets may be at greater risk of future terrorist a acks than other possible targets in the United States. Federal law imposes site security
requirements, specifically on chemical facili es, which have increased our overhead expenses. Federal regula ons have also been adopted to increase the
security of the transporta on of hazardous chemicals in the United States. We ship and receive materials that are classified as hazardous and we believe
we have met these requirements, but addi onal federal and local regula ons that limit the distribu on of hazardous materials are being considered. Bans
on movement of hazardous materials through certain ci es could adversely affect the efficiency of our logis cal opera ons. Broader restric ons on
hazardous material movements could lead to addi onal investment and could change where and what products we provide.
The occurrence of extraordinary events, including future terrorist a acks, wars, global health developments and pandemics, or escala on of hos li es,
cannot be predicted, but their occurrence can be expected to nega vely affect the economy in general, and specifically the markets for our products. The
resul ng damage from a direct a ack on our assets, or assets used by us, could include loss of life and property damage. In addi on, available insurance
coverage may not be sufficient to cover all of the damage incurred or, if available, may be prohibi vely expensive.
We may not be able to renew our leases of land where four of our opera ons facili es reside.
We lease the land where our three main terminals are located and where another significant manufacturing plant is located. These leases, including all
renewal periods, have expira on dates from 2024 to 2044. The failure to secure extended lease terms on any one of these facili es may have a material
adverse impact on our business, as they are where a por on of our chemicals are manufactured and where the majority of our bulk chemicals are stored.
While we can make no assurances, based on historical experience and an cipated future needs, we intend to extend these leases and believe that we will
be able to renew our leases as the renewal periods expire. If we are unable to renew three of our leases (two relate to terminals and one to
manufacturing) any property remaining on the land becomes the property of the lessor, and the lessor has the op on to either maintain the property or
remove the property at our expense. The fourth lease provides that we turn any property remaining on the land over to the lessor for them to maintain or
remove at their expense. The cost to relocate our opera ons could have a material adverse effect on our results of opera ons and financial condi on.
8
LEGAL AND REGULATORY RISKS
Environmental, health and safety, transporta on and storage laws and regula ons cause us to incur substan al costs and may subject us to future
liabili es and risks.
We are subject to numerous federal, state and local environmental, health, safety and land use laws and regula ons in the jurisdic ons in which we
operate, including the management, storage, transporta on and disposal of chemicals and wastes; product regula on; air water and soil contamina on;
land use, fire code and zoning; and the inves ga on and cleanup of any spills or releases that may result from our management, handling, storage, sale,
or transporta on of chemicals and other products. The nature of our business exposes us to risks of liability under these laws and regula ons. Ongoing
compliance with such laws and regula ons is an important considera on for us and we invest substan al capital and incur significant opera ng costs in
our compliance efforts. In addi on, societal concerns regarding the safety of chemicals in commerce and their poten al impact on the environment have
resulted in a growing trend towards increasing levels of product safety and environmental protec on regula ons and restric ons on the loca ons and
opera ons of chemical facili es. These concerns have led to, and could con nue to result in, more stringent regulatory interven on by governmental
authori es. In addi on, these concerns could influence public percep ons, impact the commercial viability of the products we sell and increase the costs
to comply with increasingly complex regula ons, which could have a nega ve impact on our business, financial condi on and results of opera ons.
In addi on, we operate a fleet of more than 250 commercial vehicles, primarily in our Water Treatment Group, which are highly regulated, including by
the DOT. The DOT governs transporta on ma ers including authoriza on to engage in motor carrier service, including the necessary permits to conduct
our businesses, equipment opera on, and safety. We are audited periodically by the DOT to ensure that we are in compliance with various safety, hours-
of-service, and other rules and regula ons. If we were found to be out of compliance, the DOT could severely restrict or otherwise impact our opera ons,
which could have a material adverse effect on our opera ons as a whole, including our results of opera ons and cash flows.
If we violate applicable laws or regula ons, in addi on to being required to correct such viola ons, we could be held liable in administra ve, civil or
criminal proceedings for substan al fines and other sanc ons that could disrupt, limit or halt our opera ons, which could have a material adverse effect
on our opera ons as a whole, including our results of opera ons and cash flows. Liabili es associated with the inves ga on and cleanup of releases of
hazardous substances, as well as personal injury, property damages or natural resource damages arising out of such releases of hazardous substances,
may be imposed in many situa ons without regard to viola ons of laws or regula ons or other fault, and may also be imposed jointly and severally (so
that a responsible party may be held liable for more than its share of the losses involved, or even the en re loss). Such liabili es can be difficult to iden fy
and the extent of any such liabili es can be difficult to predict. We use, and in the past have used, hazardous substances at many of our facili es, and
have generated, and con nue to generate, hazardous wastes at a number of our facili es. We have in the past been, and may in the future be, subject to
claims rela ng to exposure to hazardous materials and the associated liabili es may be material.
9
Many of our products, par cularly our food, pharmaceu cal and health and nutri on products are subject to government regula on, both in the
United States and abroad, which could increase our costs significantly and limit or prevent the sale of such products.
The manufacture, packaging, labeling, adver sing, promo on, distribu on and sale of many of our products, but our food, pharmaceu cal, pes cide and
health and nutri on products in par cular, are subject to regula on by numerous na onal and local governmental agencies in the United States and other
countries. The primary regulatory bodies in the United States are the Food and Drug Administra on (the “FDA”), the Environmental Protec on Agency,
the United States Department of Agriculture and the Federal Trade Commission, and we are also subject to similar regulators in other countries. Failure to
comply with these regulatory requirements may result in various types of penal es or fines. These include injunc ons, product withdrawals, recalls,
product seizures, fines and criminal prosecu ons. Individual states also regulate our products. A state may interpret claims or products presump vely
valid under federal law as illegal under that state’s regula ons. Approvals or licensing may be condi oned on reformula on of products or may be
unavailable with respect to certain products or product ingredients. Any of these government agencies, as well as legisla ve bodies, can change exis ng
regula ons, or impose new ones, or could take aggressive measures, causing or contribu ng to a variety of nega ve consequences, which may include
one or more of the following:
• stopping the sale of products,
• requirements for the reformula on of certain or all products to meet new standards,
• the recall or discon nuance of certain or all products,
• addi onal record-keeping requirements,
• expanded documenta on of the proper es of certain or all products,
• expanded or different labeling,
• adverse event tracking and repor ng, and
• addi onal scien fic substan a on.
In par cular, the FDA’s current GMPs describe policies and procedures designed to ensure that nutraceu cals, pharmaceu cals and dietary supplements
are produced in a quality manner, do not contain contaminants or impuri es, and are accurately labeled and cover the manufacturing, packaging, labeling
and storing of supplements, with requirements for quality control, design and construc on of manufacturing plants, tes ng of ingredients and final
products, record keeping, and complaints processes. Those who manufacture, package or store dietary supplements must comply with current GMPs. If
we or our suppliers fail to comply with current GMPs, the FDA may take enforcement ac on against us or our suppliers.
Any or all of the poten al nega ve consequences described above could have a material adverse effect on us or substan ally increase the cost of doing
business in these areas. There can be no assurance that the regulatory environment in which we operate will not change or that such regulatory
environment, or any specific ac on taken against us, will not result in a material adverse effect on us.
10
FINANCIAL RISKS
The insurance that we maintain may not fully cover all poten al exposures.
We maintain lines of commercial insurance, such as property, general liability and casualty insurance, but such insurance may not cover all risks
associated with the hazards of our businesses and is subject to limita ons, including deduc bles and limits on the liabili es covered. We may incur losses
beyond the limits or outside the coverage of our insurance policies, including liabili es for environmental remedia on and product liability. In addi on,
from me to me, various types of insurance for companies in the chemical, food or health and nutri on products industries have not been available on
commercially acceptable terms or, in some cases, have not been 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 we maintain.
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 Na onal Associa on ("U.S. Bank") and other lenders (collec vely, the
“Lenders”), which includes secured revolving credit facili es (the “Revolving Loan Facility”) totaling $250.0 million. The Revolving Loan Facility includes a
$10.0 million le er of credit subfacility and $25.0 million swingline subfacility. At April 2, 2023, we had $112.0 million outstanding under the Revolving
Loan Facility.
We may make payments on the Revolving Loan Facility from me to me. If we are unable to generate sufficient cash flow or otherwise obtain funds
necessary to make payments on our credit facili es, we could be in default when the facili es become due in 2027. We are also required to comply with
several 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 condi on,
opera ng results or cash flows.
The Credit Agreement also contains other customary affirma ve and nega ve covenants, including covenants that restrict our ability to incur addi onal
indebtedness, dispose of significant assets, make certain investments, including any acquisi ons other than permi ed acquisi ons, make certain
payments, enter into sale and leaseback transac ons, grant liens on its assets or rate management transac ons, subject to certain limita ons. These
restric ons may adversely affect our business.
Impairment to the carrying value of our goodwill or other intangible assets could adversely affect our financial condi on and consolidated results of
opera ons.
Goodwill represents the excess of the cost of acquired businesses over the fair value of iden fiable tangible net assets and iden fiable intangible assets
purchased. Goodwill is tested at least annually for impairment and is tested for impairment more frequently if events or changes in circumstances
indicate that the asset might be impaired. A significant amount of judgment is involved in determining if an indica on of impairment exists. Factors may
include, among others: a significant decline in our expected future cash flows; a sustained, significant decline in our stock price and market capitaliza on;
a significant adverse change in the business climate; unan cipated compe on; and slower growth rates. An adverse change in these factors may have a
significant impact on the recoverability of the net assets recorded, and any resul ng impairment charge in the future could have a material adverse effect
on our financial condi on and consolidated results of opera ons.
We evaluate the useful lives of our intangible assets to determine if they are definite- or indefinite-lived. Reaching a determina on on useful life requires
significant judgments and assump ons regarding the future effects of obsolescence, demand, compe on, other economic factors (such as the stability
of the industry, legisla ve ac on that results in an uncertain or changing regulatory environment, and expected changes in distribu on channels), and the
expected lives of other related groups of assets.
We cannot accurately predict the amount and ming of any impairment of goodwill and other intangible assets. Should the value of these assets become
impaired, there could be a material adverse effect on our financial condi on and consolidated results of opera ons.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
11
ITEM 2. PROPERTIES
Our facili es material to our opera ons consist of our loca ons described below. In addi on to the facili es listed below, our Water Treatment group
operates out of 35 addi onal warehouse loca ons, the majority of which are owned by us. We believe that our facili es are adequate and suitable for the
purposes they serve. Unless noted, each facility is owned by us and is primarily used as office and warehouse space. We believe that we carry customary
levels of insurance covering the replacement of damaged property.
Group
Corporate headquarters
Health and Nutri on
Industrial
Industrial and Water Treatment
Water Treatment
Loca on
Roseville, MN
Fullerton, CA (1)
Florida, NY (2)
Minneapolis, MN (3)
Centralia, IL (3)
Dupo, IL (3) (4)
St. Paul, MN (3) (5)
Rosemount, MN (3)
St. Paul, MN (3) (5)
Camanche, IA (3)
Memphis, TN (3)
Apopka, FL (3)
Faye eville, TN (3)
Sulphur, LA (3)
Rail/Barge Access
Rail
Rail
Rail
Rail/Barge
Rail
Rail/Barge
Rail/Barge
Rail/Barge
Rail
Approx.
Square Feet
50,000
56,000
107,000
177,000
121,000
64,000
32,000
153,000
59,000
95,000
41,000
32,000
54,000
30,000
(1) This is a leased facility comprising administra ve offices and a distribu on facility. The lease runs through January 2026.
(2) This is comprised of (i) a 79,000 square foot manufacturing plant which sits on approximately 16 acres and (ii) a leased 28,000 square foot
warehouse located in close proximity that is leased un l December 2025.
(3) This is a manufacturing and/or distribu on facility owned by the Company. This facility includes outside storage tanks for the storage of liquid bulk
chemicals, as well as smaller tanks for storing and mixing chemicals.
(4) The land for this facility is leased from a third party. The lease expires in May 2024, with automa c one-year renewal periods.
(5) The land for these facili es is leased from the Port Authority of the City of St. Paul, Minnesota. One of the applicable leases runs through 2033,
one runs un l 2029, and one runs through 2044 including all available lease extensions.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary rou ne li ga on incidental to the business, to which we or any of our subsidiaries
are a party or of which any of our property is the subject.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
12
PART II
ITEM 5. MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common shares are listed on the Nasdaq Global Select Market under the symbol “HWKN.” As of May 12, 2023, shares of our common shares were
held by approximately 367 shareholders of record.
The following graph compares the cumula ve total shareholder return on our common shares with the cumula ve 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.
The graph assumes the investment of $100 in our stock and each of those indices on April 1, 2018, and reinvestment of all dividends.
13
ITEM 6. RESERVED
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion and analysis of our financial condi on and results of opera ons for fiscal 2023 and 2022. This discussion should be read in
conjunc on with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on
Form 10-K.
We have omi ed discussion of the earliest of the three years covered by our consolidated financial statements presented in this report because that
disclosure was already included in our Annual Report on Form 10-K for fiscal 2022, filed with the SEC on May 18, 2022. You are encouraged to reference
Part II, Item 7, within that report, for a discussion of our financial condi on and results of opera ons for fiscal 2022 compared to fiscal 2021.
Overview
We derive substan ally all of our revenues from the sale of specialty chemicals and ingredients that we formulate, distribute, blend and manufacture for
our Industrial, Water Treatment and Health and Nutri on customers.
Financial Overview
Highlights of fiscal 2023 include:
•
•
•
Sales of $935.1 million, a 21% increase from fiscal 2022;
Gross profit of $165.1 million, an increase of $18.6 million, or 13% from fiscal 2022; and
Diluted earnings per share (EPS) of $2.86, an increase of $0.42, or 17%, from fiscal 2022.
We focus on total profitability dollars when evalua ng our financial results as opposed to profitability as a percentage of sales, as sales dollars tend to
fluctuate as raw material prices rise and fall, par cularly in our Industrial and Water Treatment segments. The costs for certain of our raw materials can
rise or fall rapidly, causing fluctua ons 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
most recent product costs to be recognized in our income statement. The LIFO inventory valua on method and the resul ng cost of sales are consistent
with our business prac ces of pricing to current chemical raw material prices. Inventories in our Health and Nutri on 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
defini on of bulk commodity products includes products that we do not modify in any way, but receive, store, and ship from our facili es, or direct ship to
our customers in large quan es. We disclose the percentage of our overall sales that consist of sales of bulk commodity products as these products are
generally distributed and we do not add significant value to these products in comparison to our non-bulk products. Sales of these products are generally
highly compe ve and price sensi ve. As a result, bulk commodity products generally have our lowest margins.
Factors Affec ng Comparability of Results
Asset Sales and Business Acquisi ons
On March 30, 2023, we sold certain assets in our Industrial segment related to our consumer bleach packaging business for $7 million. These assets were
not deemed core to our Industrial segment opera ons. The assets sold included plant equipment, inventory, and intangible assets, all related to the
packaging of bleach. We realized a gain of $3 million on this sale, which has been recorded as a reduc on to selling, general and administra ve expenses.
In the fourth quarter of fiscal 2022, we acquired substan ally all the assets of NAPCO Chemical Company, Inc. and its affiliates ("NAPCO") under the terms
of an asset purchase agreement among us, NAPCO and certain other par es thereto. NAPCO manufactures and distributes water treatment chemicals
from three loca ons in Texas. The results of opera ons are included as part of our Water Treatment segment.
14
In the third quarter of fiscal 2022, we acquired substan ally all the assets of Water and Waste Special es, LLC, under the terms of an asset purchase
agreement with Water and Waste Special es and its shareholders. Water and Waste Special es was a water treatment chemical distribu on company
opera ng primarily in Alabama. The results of opera ons since the acquisi on date are included in our Water Treatment segment.
In the second quarter of fiscal 2022, we acquired substan ally all the assets of Southeast Water Systems LLC, under the terms of an asset purchase
agreement with Southeast Water Systems and its shareholders. Southeast Water Systems supplied and installed water treatment chemical equipment to
its customers located primarily in Alabama, southern Georgia and the Florida panhandle. The results of opera ons since the acquisi on date are included
in our Water Treatment segment.
The aggregate annual revenue of these three businesses acquired in fiscal 2022 totaled approximately $17 million, as determined using the applicable
twelve-month period preceding each respec ve acquisi on date.
15
Results of Opera ons
The following table sets forth certain items from our statement of income as a percentage of sales for fiscal 2023 and 2022:
Fiscal 2023
Fiscal 2022
Sales
Cost of sales
Gross profit
Selling, general and administra ve expenses
Opera ng income
Interest expense, net
Other income
Income before income taxes
Income tax provision
Net income
Fiscal 2023 Compared to Fiscal 2022
Sales
100.0 %
(82.3)%
17.7 %
(8.3)%
9.4 %
(0.6)%
— %
8.8 %
(2.4)%
6.4 %
100.0 %
(81.1)%
18.9 %
(9.7)%
9.2 %
(0.2)%
— %
9.0 %
(2.3)%
6.7 %
Sales were $935.1 million for fiscal 2023, an increase of $160.6 million, or 21%, from sales of $774.5 million for fiscal 2022, driven primarily by increased
selling prices. Fiscal 2022 included an addi onal week, which we es mated to add approximately $17.5 million in addi onal sales in that year.
Industrial Segment. Industrial segment sales increased $83.9 million, or 22%, to $470.8 million for fiscal 2023, as compared to $386.9 million for fiscal
2022. Sales of bulk commodity products in the Industrial segment were approximately 16% of sales dollars in both fiscal 2023 and fiscal 2022. The
increase in sales was driven by increased selling prices on many of our products driven primarily by higher costs on many of our raw materials, while total
sales volumes were down approximately 11%. Average selling prices increased 36% over the prior year, in part due to higher raw material costs as well as
product mix changes. Fiscal 2022 included an addi onal week, which we es mated to be approximately $10.0 million in addi onal sales in our Industrial
segment in that year.
Water Treatment Segment. Water Treatment segment sales increased $76.8 million, or 34%, to $304.9 million for fiscal 2023, as compared to $228.1
million for fiscal 2022. Sales of bulk commodity products in the Water Treatment segment were approximately 9% of sales dollars in both fiscal 2023 and
fiscal 2022. Sales increased as a result of increased selling prices on many of our products driven by higher costs on many of our raw materials, with
average selling prices increasing 28% over the prior year. In addi on, a 4% increase in sales volume, due to the added sales from acquired businesses,
contributed to the year-over-year increase in sales. Fiscal 2022 included an addi onal week, which we es mated to add approximately $3.9 million in
addi onal sales in our Water Treatment segment in that year.
Health and Nutri on Segment. Health and Nutri on segment sales decreased $0.1 million, or less than 1%, to $159.4 million for fiscal 2023, as compared
to $159.5 million for fiscal 2022. Sales of our manufactured products increased 40% year over year, but were offset by a 12% decline in sales of our
specialty distributed products. Fiscal 2022 included an addi onal week, which we es mated to add approximately $3.6 million in addi onal sales in our
Health and Nutri on segment in that year.
Gross Profit
Gross profit increased $18.6 million, or 13%, to $165.1 million, or 18% of sales, for fiscal 2023, from $146.5 million, or 19% of sales, for fiscal 2022. During
fiscal 2023, the LIFO reserve increased, and gross profits decreased, by $18.5 million, primarily due to rising raw material costs. In fiscal 2022, the LIFO
reserve increased, and gross profits decreased, by $15.8 million, primarily due to rising raw material costs. Gross profit increased due to increased
revenue, par ally offset by the unfavorable year-over-year impact of the increased LIFO reserve. Fiscal 2022 included an addi onal week, which we
es mated to add approximately $3.6 million in addi onal gross profit in that year.
16
Industrial Segment. Gross profit for the Industrial segment increased $8.5 million, or 14%, to $68.1 million, or 14% of sales, for fiscal 2023, from $59.6
million, or 15% of sales, for fiscal 2022. During fiscal 2023, the LIFO reserve increased, and gross profits decreased, by $12.3 million, primarily due to rising
raw material costs. In fiscal 2022, the LIFO reserve increased, and gross profits decreased, by $10.4 million, primarily due to rising raw material costs.
Gross profit increased as a result of the increase in sales, par ally offset by the unfavorable year-over-year impact of the increased LIFO reserve. Fiscal
2022 included an addi onal week, which we es mated to add approximately $1.9 million in addi onal gross profit in our Industrial segment in that year.
Water Treatment Segment. Gross profit for the Water Treatment segment increased $12.6 million, or 23%, to $67.2 million, or 22% of sales, for fiscal
2023, from $54.6 million, or 24% of sales, for fiscal 2022. During fiscal 2023, the LIFO reserve increased, and gross profits decreased, by $6.2 million,
primarily due to rising raw material costs. During fiscal 2022, the LIFO reserve increased, and gross profit decreased, by $5.4 million, primarily due to
rising raw material costs. Gross profit increased as a result of the increase in sales. Fiscal 2022 included an addi onal week, which we es mated to add
approximately $1.0 million in addi onal gross profit in our Water Treatment segment in that year.
Health and Nutri on Segment. Gross profit for our Health and Nutri on segment decreased $2.5 million, or 8%, to $29.8 million, or 19% of sales, for fiscal
2023, from $32.3 million, or 20% of sales, for fiscal 2022. Gross profit decreased as a result of a product mix shi . Fiscal 2022 included an addi onal week,
which we es mated to add approximately $0.7 million in addi onal gross profit in our Health and Nutri on segment in that year.
Selling, General and Administra ve Expenses
SG&A expenses increased $1.6 million to $77.0 million, or 8% of sales, for fiscal 2023, from $75.3 million, or 10% of sales, for fiscal 2022. Included in
SG&A expenses for the current fiscal year was a gain of approximately $3.0 million related to the sale of certain assets related to our consumer bleach
packaging business. In addi on, a year-over-year decrease in compensa on expense of $0.5 million related to our non-qualified deferred compensa on
plan reduced SG&A expenses, with the offset in Other Expense. In spite of these decreases in SG&A expense, expenses increased primarily due to the
added costs from the acquired businesses in our Water Treatment segment and increased wages. Fiscal 2022 included an addi onal week, which we
es mated to add approximately $1.0 million in addi onal SG&A expense in that year.
Opera ng Income
Opera ng income was $88.2 million, or 9% of sales, for fiscal 2023, as compared to $71.2 million, or 9% of sales, for fiscal 2022 due to the combined
impact of the factors discussed above. Fiscal 2022 included an addi onal week, which we es mated to add approximately $3.0 million in addi onal
opera ng income expense in that year.
Interest Expense, Net
Interest expense was $5.2 million for fiscal 2023, an increase of $3.8 million from interest expense of $1.4 million for fiscal 2022. The increase was due to
an increase in borrowing interest rates as well as an increase in average outstanding borrowings due to increased capital needs.
Income Tax Provision
Our effec ve tax rate was approximately 27.3% for fiscal 2023 and 26.3% for fiscal 2022. The effec ve tax rate is impacted by projected levels of annual
taxable income, permanent items, and state taxes. The current year increase in the effec ve tax rate was primarily driven by unfavorable book to tax LIFO
differences.
17
Selected Quarterly Financial Data
Selected financial data for our fiscal quarters is shown below. No changes have been made to previously reported informa on.
(In thousands, except per share data)
Sales
Gross profit
Selling, general, and administra ve expenses
Opera ng income
Net income
Basic earnings per share
Diluted earnings per share
Sales
Gross profit
Selling, general, and administra ve expenses
Opera ng income
Net income
Basic earnings per share
Diluted earnings per share
Sales
Gross profit
Selling, general, and administra ve expenses
Opera ng income
Net income
Basic earnings per share
Diluted earnings per share
$
$
$
$
$
$
$
$
$
First
Second
Fiscal 2023
Third
Fourth
Total
246,543 $
46,749
18,885
27,864
19,695
0.94 $
0.94 $
241,192 $
46,374
19,838
26,536
18,000
0.86 $
0.86 $
219,218 $
36,271
21,004
15,267
10,733
0.52 $
0.51 $
228,145 $
35,725
17,242
18,483
11,613
0.56 $
0.55 $
935,098
165,119
76,969
88,150
60,041
2.88
2.86
First
Second
Fiscal 2022
Third
Fourth
Total
181,241 $
38,974
16,856
22,118
16,628
0.79 $
0.79 $
183,277 $
37,287
17,679
19,608
14,133
0.67 $
0.67 $
187,050 $
33,940
19,681
14,259
10,204
0.49 $
0.48 $
222,973 $
36,319
21,110
15,209
10,577
0.51 $
0.50 $
774,541
146,520
75,326
71,194
51,542
2.46
2.44
First
Second
Fiscal 2021
Third
Fourth
Total
143,172 $
30,976
15,038
15,938
11,788
0.56 $
0.55 $
147,801 $
32,797
16,221
16,576
12,190
0.58 $
0.57 $
142,927 $
28,239
17,750
10,489
7,921
0.38 $
0.37 $
162,971 $
31,750
18,875
12,875
9,081
0.43 $
0.43 $
596,871
123,762
67,884
55,878
40,980
1.95
1.93
Earnings per share may not equal the face of the Consolidated Statements of Income due to rounding.
Liquidity and Capital Resources
Cash provided by opera ng ac vi es in fiscal 2023 was $77.4 million compared to $42.8 million in fiscal 2022. Our net cash provided by opera ng
ac vi es increased $34.6 million compared to fiscal 2022. In the prior fiscal year, we expended significant working capital as accounts receivable and
inventory increased over fiscal 2021 resul ng in a net $37 million use of cash for working capital accounts. In fiscal 2023, we expended net $13 million in
the aggregate for working capital accounts due to lower year-over-year changes. This, combined with improved net income, resulted in the year-over-year
increase in net cash provided by opera ng ac vi es. Due to the nature of our opera ons, which includes purchases of large quan es of bulk chemicals,
the ming of purchases can result in significant changes in working capital and the resul ng opera ng cash flow. Historically, our cash requirements for
working capital increase during the period from March through November as caus c soda inventory levels increase as most of our barges are received
during this period.
18
Cash used in inves ng ac vi es was $41.2 million in fiscal 2023 compared to $49.8 million in fiscal 2022. Capital expenditures for property, plant and
equipment were $48.3 million in fiscal 2023 and $28.5 million in fiscal 2022. The current year increase in capital expenditures was primarily driven by
increased expenditures for new trucks and facility improvements and expansions. Cash used in inves ng ac vi es included no acquisi on spending in
fiscal 2023 compared to an aggregate of $21.5 million for Water Treatment group acquisi ons in fiscal 2022. Cash used in inves ng ac vi es also included
proceeds from asset disposals of $7.0 million in fiscal 2023 compared to $0.3 million in fiscal 2022. The proceeds received in fiscal 2023 related primarily
to our sale of certain assets related to our consumer bleach packaging business.
Cash used in financing ac vi es was $32.1 million in fiscal 2023, as compared to cash provided by financing ac vi es of $7.4 million in fiscal 2022. Cash
used in financing ac vi es included net debt repayments of $14.0 million in fiscal 2023, compared to net debt borrowings of $27.0 million in fiscal 2022,
which was used primarily to fund our acquisi ons in fiscal 2022. We paid out cash dividends of $12.0 million in fiscal 2023 and $11.1 million in fiscal 2022.
In fiscal 2023, we used $6.6 million to repurchase shares under our board-authorized share repurchase program, and in fiscal 2022, we used $8.5 million
to repurchase shares under the program.
Our cash balance was $7.6 million at April 2, 2023, an increase of $4.1 million as compared with April 3, 2022. Cash flows generated by opera ons during
fiscal 2023 were offset by the cash expended for capital expenditures, repayments of debt and dividend payments in fiscal 2023.
We are party to a Credit Agreement with U.S. Bank as Sole Lead Arranger and Sole Book Runner, and other lenders from me to me party thereto,
whereby U.S. Bank is also serving as Administra ve Agent. The Credit Agreement provides us with a Revolving Loan Facility totaling $250.0 million. The
Revolving Loan Facility includes a $10 million le er of credit subfacility and $25 million swingline subfacility. The Revolving Loan Facility has a five-year
maturity date, maturing on April 30, 2027. The Revolving Loan Facility is secured by substan ally all of our personal property assets and those of our
subsidiaries.
Borrowings under the Revolving Loan Facility bear interest at a rate per annum equal to one of the following, plus, in both cases, an applicable margin
based upon our leverage ra o: (a) Term SOFR, which includes a credit spread adjustment of 0.10%, for an interest period of one, three or six months as
selected by us, reset at the end of the selected interest period, or (b) a base rate determined by reference to the highest of (1) U. S. Bank’s prime rate,
(2) the Federal Funds Effec ve Rate plus 0.5%, or (3) one-month Term SOFR for U.S. dollars plus 1.0%. The Term SOFR margin is between 0.85% and
1.35%, depending on our leverage ra o. The base rate margin is between 0.00% and 0.35%, depending on our leverage ra o. At April 3, 2022, the
effec ve interest rate on our borrowings was 4.3%.
In addi on to paying interest on the outstanding principal under the Revolving Loan Facility, we are required to pay a commitment fee on the unu lized
commitments thereunder. The commitment fee is between 0.15% and 0.25%, depending on our leverage ra o.
Debt issuance costs paid to the Lenders are being amor zed as interest expense over the term of the Credit Agreement. As of April 2, 2023, the
unamor zed balance of these costs was $0.4 million, and is reflected as a reduc on of debt on our balance sheet.
The Credit Agreement requires us to maintain (a) a minimum fixed charge coverage ra o of 1.15 to 1.00 and (b) a maximum total cash flow leverage ra o
of 3.0 to 1.0. The Credit Agreement also contains other customary affirma ve and nega ve covenants, including covenants that restrict our ability to incur
addi onal indebtedness, dispose of significant assets, make certain investments, including any acquisi ons other than permi ed acquisi ons, make
certain payments, enter into sale and leaseback transac ons, grant liens on our assets or enter into rate management transac ons, subject to certain
limita ons. We are permi ed to make distribu ons, pay dividends and repurchase shares so long as no default or event of default exists or would exist as
a result thereof. We were in compliance with all covenants of the Credit Agreement as of April 2, 2023 and expect to remain in compliance with all
covenants for the next 12 months.
The Credit Agreement contains customary events of default, including failure to comply with covenants in the Credit Agreement and other loan
documents, cross default to other material indebtedness, failure by us to pay or discharge material judgments, bankruptcy, and change of control. The
occurrence of an event of default would permit the lenders to terminate their commitments and accelerate loans under the Credit Facility.
19
We have in place an interest rate swap agreement to manage the risk associated with a por on of our variable-rate long-term debt. We do not u lize
deriva ve instruments for specula ve purposes. The interest rate swap involves the exchange of fixed-rate and variable-rate payments without the
exchange of the underlying no onal amount on which the interest payments are calculated. The no onal amount of the swap agreement is $60 million
and it will terminate on May 1, 2027.
As part of our growth strategy, we have acquired businesses and may pursue acquisi ons or other strategic rela onships in the future that we believe will
complement or expand our exis ng businesses or increase our customer base. We believe we could borrow addi onal funds under our current or new
credit facili es or sell equity for strategic reasons or to further strengthen our financial posi on.
Material Cash Requirements
The following table provides aggregate informa on about our contractual payment obliga ons and the periods in which payments are due:
Contractual Obliga on
2024
2025
2026
Payments Due by Fiscal Period
2027
(In thousands)
2028
More than
5 Years
Total
Senior secured revolver (1)
Interest payments (2)
Opera ng lease obliga ons (3)
Pension withdrawal liability (4)
$
$
$
$
— $
6,749 $
1,932 $
467 $
— $
6,749 $
1,742 $
467 $
— $
6,749 $
1,599 $
467 $
— $
6,749 $
1,340 $
467 $
112,000 $
561 $
1,282 $
467 $
— $
— $
3,862 $
2,570 $
112,000
27,557
11,757
4,905
(1) Represents balance outstanding as of April 2, 2023, and assumes such amount remains outstanding un l its maturity date, as periodic payments are
not required under the terms of our Credit Agreement. However, it is our inten on to pay down our debt with available excess cash flow. See Note 8
of our consolidated Financial Statements for further informa on.
(2) Represents interest payments and commitment fees payable on outstanding balances under our revolver and assumes interest rates remain
unchanged from the rate as of April 2, 2023.
(3) As reported under ASC Topic 842.
(4) This relates to our withdrawal from a mul employer pension plan. Payments on this obliga on will con nue through 2034.
In addi on to the above contractual obliga ons, in the ordinary course of business we have rou ne cash requirements related to capital expenditures for
new trucks, facility improvements and expansions, safety equipment and other addi ons of property, plant and equipment. Our capital expenditures in
fiscal 2023 were $48.3 million and in fiscal 2023 were $28.5 million. We an cipate total capital expenditures to be in the range of $40 to $45 million for
fiscal 2024.
Cri cal Accoun ng Es mates
In preparing the financial statements, we follow U.S. generally accepted accoun ng principles (“GAAP”). The prepara on of these financial statements
requires us to make es mates and judgments that affect the reported amounts of assets, liabili es, sales and expenses, and related disclosure of
con ngent assets and liabili es. We re-evaluate our es mates on an ongoing basis. Our es mates are based on historical experience and on various other
assump ons that are believed to be reasonable under the circumstances. Actual results may differ from these es mates under different assump ons and
condi ons. We have determined we have no cri cal accoun ng es mates material to our consolidated financial posi on, results of opera ons or cash
flow.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are subject to the risk inherent in the cyclical nature of commodity chemical prices. However, we do not currently purchase forward contracts or
otherwise engage in hedging ac vi es with respect to the purchase of commodity chemicals. We a empt to pass changes in the cost of our materials on
to our customers; however, there are no assurances that we will be able to pass on the increases in the future.
We are exposed to market risks related to interest rates. Our exposure to changes in interest rates is limited to borrowings under our credit facility. A 25-
basis point change in interest rates on the variable-rate por on of debt not covered by the interest rate swap would poten ally increase or decrease
annual interest expense 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 ac vi es.
20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accoun ng Firm (PCAOB ID: 248)
Index to Consolidated Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
21
22
24
25
26
27
28
29
Report of Independent Registered Public Accoun ng Firm
Board of Directors and Shareholders
Hawkins, Inc.
Opinion on internal control over financial repor ng
We have audited the internal control over financial repor ng of Hawkins, Inc. (a Minnesota corpora on) and subsidiaries (the “Company”) as of April 2,
2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Commi ee of Sponsoring Organiza ons of the
Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effec ve internal control over financial repor ng as of
April 2, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accoun ng Oversight Board (United States) (“PCAOB”), the consolidated
financial statements of the Company as of and for the year ended April 2, 2023, and our report dated May 17, 2023 expressed an unqualified opinion on
those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effec ve internal control over financial repor ng and for its assessment of the effec veness of
internal control over financial repor ng, included in the accompanying Management’s Report on Internal Control Over Financial Repor ng. Our
responsibility is to express an opinion on the Company’s internal control over financial repor ng based on our audit. We are a public accoun ng firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securi es laws and the
applicable rules and regula ons of the Securi es and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effec ve internal control over financial repor ng was maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial repor ng, assessing the risk that a material weakness exists, tes ng and evalua ng the
design and opera ng effec veness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Defini on and limita ons of internal control over financial repor ng
A company’s internal control over financial repor ng is a process designed to provide reasonable assurance regarding the reliability of financial repor ng
and the prepara on of financial statements for external purposes in accordance with generally accepted accoun ng principles. A company’s internal
control over financial repor ng includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transac ons and disposi ons of the assets of the company; (2) provide reasonable assurance that transac ons are recorded as
necessary to permit prepara on of financial statements in accordance with generally accepted accoun ng principles, and that receipts and expenditures
of the company are being made only in accordance with authoriza ons of management and directors of the company; and (3) provide reasonable
assurance regarding preven on or mely detec on of unauthorized acquisi on, use, or disposi on of the company’s assets that could have a material
effect on the financial statements.
Because of its inherent limita ons, internal control over financial repor ng may not prevent or detect misstatements. Also, projec ons of any evalua on
of effec veness to future periods are subject to the risk that controls may become inadequate because of changes in condi ons, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ GRANT THORNTON LLP
Minneapolis, Minnesota
May 17, 2023
22
Board of Directors and Shareholders
Hawkins, Inc.
Report of Independent Registered Public Accoun ng Firm
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Hawkins, Inc. (a Minnesota corpora on) and subsidiaries (the “Company”) as of April
2, 2023 and April 3, 2022 and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the
three years in the period ended April 2, 2023, and the related notes and financial statement schedule included under Item 15(a) (collec vely referred to
as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial posi on of the Company as of
April 2, 2023 and April 3, 2022, and the results of its opera ons and its cash flows for each of the three years in the period ended April 2, 2023, in
conformity with accoun ng principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accoun ng Oversight Board (United States) (“PCAOB”), the Company’s
internal control over financial repor ng as of April 2, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by
the Commi ee of Sponsoring Organiza ons of the Treadway Commission (“COSO”), and our report dated May 17, 2023 expressed an unqualified opinion.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accoun ng firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securi es laws and the applicable rules and regula ons of the Securi es 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 audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to assess the risks of material misstatement of the financial statements, 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
financial statements. Our audits also included evalua ng the accoun ng principles used and significant es mates made by management, as well as
evalua ng the overall presenta on of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Cri cal audit ma ers
Cri cal audit ma ers are ma ers arising from the current period audit of the financial statements that were communicated or required to be
communicated to the audit commi ee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjec ve, or complex judgments. We determined that there are no cri cal audit ma ers.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2020.
Minneapolis, Minnesota
May 17, 2023
23
HAWKINS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per-share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Trade accounts receivables, net
Inventories
Prepaid expenses and other current assets
Total current assets
PROPERTY, PLANT, AND EQUIPMENT:
Land
Buildings and improvements
Machinery and equipment
Transporta on equipment
Office furniture and equipment
Less accumulated deprecia on
Net property, plant, and equipment
OTHER ASSETS:
Right-of-use assets
Goodwill
Intangible assets, net
Deferred compensa on plan asset
Other
Total other assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable — trade
Accrued payroll and employee benefits
Current por on of long-term debt
Income tax payable
Other current liabili es
Total current liabili es
LONG-TERM DEBT
LONG-TERM LEASE LIABILITY
PENSION WITHDRAWAL LIABILITY
DEFERRED INCOME TAXES
DEFERRED COMPENSATION LIABILITY
OTHER LONG-TERM LIABILITIES
Total liabili es
COMMITMENTS AND CONTINGENCIES (Note 12)
SHAREHOLDERS’ EQUITY:
Common shares; authorized: 60,000,000 shares of $0.01 par value; 20,850,454 and 20,889,777 shares
issued and outstanding for 2023 and 2022, respec vely
Addi onal paid-in capital
Retained earnings
Accumulated other comprehensive income
Total shareholders’ equity
Total liabili es and shareholders’ equity
April 2, 2023
April 3, 2022
$
7,566 $
129,252
88,777
6,449
232,044
16,344
134,901
125,970
56,328
11,210
344,753
158,950
185,803
10,199
77,401
73,060
7,367
4,661
172,688
590,535 $
53,705 $
17,279
9,913
3,329
6,645
90,871
101,731
8,687
3,912
23,800
9,343
2,175
240,519
209
44,443
302,424
2,940
350,016
590,535 $
$
$
$
3,496
122,826
94,985
6,431
227,738
16,640
118,369
114,763
43,968
10,315
304,055
142,209
161,846
10,606
77,401
80,193
6,783
2,761
177,744
567,328
66,693
19,034
9,913
39
5,787
101,466
115,644
9,143
4,276
23,422
8,402
2,374
264,727
209
46,717
254,384
1,291
302,601
567,328
See accompanying notes to consolidated financial statements.
24
HAWKINS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per-share data)
Sales
Cost of sales
Gross profit
Selling, general and administra ve expenses
Opera ng income
Interest expense, net
Other (expense) income
Income before income taxes
Income tax expense
Net income
Weighted average number of shares outstanding-basic
Weighted average number of shares outstanding-diluted
Basic earnings per share
Diluted earnings per share
Cash dividends declared per common share
April 02, 2023
Fiscal Year Ended
April 03, 2022
March 28, 2021
935,098 $
(769,979)
165,119
(76,969)
88,150
(5,234)
(334)
82,582
(22,541)
60,041 $
774,541 $
(628,021)
146,520
(75,326)
71,194
(1,404)
189
69,979
(18,437)
51,542 $
596,871
(473,109)
123,762
(67,884)
55,878
(1,467)
1,440
55,851
(14,871)
40,980
20,848,077
21,014,905
20,947,234
21,135,258
21,024,344
21,260,296
2.88 $
2.86 $
2.46 $
2.44 $
1.95
1.93
0.57000 $
0.52250 $
0.47125
$
$
$
$
$
See accompanying notes to consolidated financial statements.
25
HAWKINS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Net income
Other comprehensive income, net of tax:
Unrealized gain on interest rate swap
Total other comprehensive income
Total comprehensive income
April 2, 2023
Fiscal Year Ended
April 3, 2022
March 28, 2021
$
$
60,041 $
51,542 $
1,649
1,649
61,690 $
1,291
1,291
52,833 $
40,980
79
79
41,059
See accompanying notes to consolidated financial statements.
26
HAWKINS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except share data)
BALANCE — March 29, 2020
Cash dividends declared and paid
Share-based compensa on expense
Ves ng of restricted stock
Shares surrendered for payroll taxes
ESPP shares issued
Shares repurchased
Other comprehensive loss, net of tax
Net income
BALANCE — March 28, 2021
Cash dividends declared and paid
Share-based compensa on expense
Ves ng of restricted stock
Shares surrendered for payroll taxes
ESPP shares issued
Shares repurchased
Other comprehensive income, net of
tax
Net income
BALANCE — April 3, 2022
Cash dividends declared and paid
Share-based compensa on expense
Ves ng of restricted stock
Shares surrendered for payroll taxes
ESPP shares issued
Shares repurchased
Other comprehensive income, net of
tax
Net income
BALANCE — April 2, 2023
Common Shares
Shares
21,024,458 $
Amount
—
—
26,542
(3,314)
88,148
(166,088)
—
—
20,969,746 $
—
—
134,230
(45,390)
71,692
(240,501)
—
—
20,889,777 $
—
—
113,147
(36,410)
65,597
(181,657)
—
—
20,850,454 $
Addi onal
Paid-in
Capital
Retained
Earnings
Accumulated Other
Comprehensive
Income (Loss)
Total
Shareholders’
Equity
211 $
—
—
—
—
1
(2)
—
—
210 $
—
—
1
—
—
(2)
50,405 $
—
3,343
—
(54)
1,582
(4,138)
—
—
51,138 $
—
3,818
(1)
(1,467)
1,772
(8,543)
182,947 $
(10,029)
—
—
—
—
—
—
40,980
213,898 $
(11,056)
—
—
—
—
—
(79) $
—
—
—
—
—
—
79
—
— $
—
—
—
—
—
—
—
—
209 $
—
—
46,717 $
—
51,542
254,384 $
1,291
—
1,291 $
—
—
1
—
1
(2)
—
3,825
(1)
(1,550)
2,007
(6,555)
(12,001)
—
—
—
—
—
—
—
—
—
—
—
—
—
209 $
—
—
44,443 $
—
60,041
302,424 $
1,649
—
2,940 $
233,484
(10,029)
3,343
—
(54)
1,583
(4,140)
79
40,980
265,246
(11,056)
3,818
—
(1,467)
1,772
(8,545)
1,291
51,542
302,601
(12,001)
3,825
—
(1,550)
2,008
(6,557)
1,649
60,041
350,016
See accompanying notes to consolidated financial statements.
27
HAWKINS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Reconcilia on to cash flows provided by opera ng ac vi es:
Deprecia on and amor za on
Opera ng leases
Loss (gain) on deferred compensa on assets
Deferred income taxes
Stock compensa on expense
(Gain) loss from asset disposals
Other
Changes in opera ng accounts (using) providing cash, net of
acquisi ons:
Trade receivables
Inventories
Accounts payable
Accrued liabili es
Lease liabili es
Income taxes
Other
Net cash provided by opera ng ac vi es
CASH FLOWS FROM INVESTING ACTIVITIES:
Addi ons to property, plant, and equipment
Acquisi ons
Proceeds from asset disposals
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash used in inves ng ac vi es
Cash dividends paid
New shares issued
Shares surrendered for payroll taxes
Shares repurchased
Payments for debt issuance costs
Payments on senior secured revolving loan
Borrowings on senior secured revolving loan
April 2, 2023
Fiscal Year Ended
April 3, 2022
March 28, 2021
$
60,041 $
51,542 $
27,440
1,971
334
(232)
3,825
(2,950)
87
(6,389)
4,717
(11,596)
(737)
(1,958)
3,290
(443)
77,400
(48,321)
—
7,091
(41,230)
(12,001)
2,008
(1,550)
(6,557)
—
(59,000)
45,000
(32,100)
4,070
3,496
7,566 $
19,485 $
4,759
2,340
24,129
1,899
(189)
(1,501)
3,818
452
93
(30,526)
(30,034)
25,138
2,723
(1,907)
214
(3,014)
42,837
(28,512)
(21,546)
302
(49,756)
(11,056)
1,772
(1,467)
(8,545)
(287)
(15,000)
42,000
7,417
498
2,998
3,496 $
19,726 $
1,197
3,733
40,980
22,669
1,896
(1,440)
(689)
3,343
110
93
(21,323)
(7,960)
2,551
7,554
(1,837)
(235)
(1,919)
43,793
(20,794)
(51,000)
362
(71,432)
(10,029)
1,583
(54)
(4,140)
—
(37,000)
76,000
26,360
(1,279)
4,277
2,998
15,783
1,288
626
Net cash (used in) provided by financing ac vi es
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS - beginning of year
CASH AND CASH EQUIVALENTS - end of year
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION-
Cash paid during the year for income taxes
Cash paid for interest
Noncash inves ng ac vi es - Capital expenditures in accounts payable
$
$
See accompanying notes to consolidated financial statements.
28
Note 1 — Nature of Business and Significant Accoun ng Policies
HAWKINS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nature of Business - We have three reportable segments: Industrial, Water Treatment and Health and Nutri on. The Industrial Group specializes in
providing industrial chemicals, products and services to industries such as agriculture, chemical processing, electronics, energy, food, pharmaceu cal and
pla ng. This group also manufactures and sells certain food-grade products, including liquid phosphates, lactates and other blended products. The Water
Treatment Group specializes in providing chemicals, products, equipment, services and solu ons for potable water, municipal and industrial wastewater,
industrial process water, non-residen al swimming pool water and agricultural water. This group has the resources and flexibility to treat systems ranging
in size from a single small well to a mul -million-gallon-per-day facility. Our Health and Nutri on Group specializes in providing ingredient distribu on,
processing and formula on solu ons to manufacturers of nutraceu cal, func onal food and beverage, personal care, dietary supplement and other
nutri onal food, health and wellness products. This group offers a diverse product por olio including minerals, vitamins and amino acids, excipients, joint
products, botanicals and herbs, sweeteners and enzymes.
Fiscal Year - Our fiscal year is a 52 or 53-week year ending on the Sunday closest to March 31. Our fiscal 2023 was 52 weeks, fiscal 2022 was 53 weeks,
and fiscal 2021 was 52 weeks. Fiscal 2024 will be 52 weeks.
Principles of Consolida on - The consolidated financial statements include the accounts of Hawkins, Inc. and its wholly-owned subsidiaries. All
intercompany transac ons and accounts have been eliminated.
Es mates - The prepara on of financial statements in conformity with U.S. generally accepted accoun ng principles (“GAAP”) requires management to
make es mates and assump ons that affect the reported amounts of assets and liabili es, par cularly receivables, inventories, property, plant and
equipment, right-of-use assets, goodwill, intangibles, accrued expenses, short-term and long-term lease liabili es, income taxes and related accounts and
the reported amounts of revenues and expenses during the repor ng period. Actual results could differ from those es mates.
Revenue Recogni on - Revenue is measured as the amount of considera on we expect to receive in exchange for transferring products. Revenue is
recognized when we sa sfy our performance obliga ons under the contract. We recognize revenue upon transfer of control of the promised products to
the customer, with revenue recognized at the point in me the customer obtains control of the products. Net sales include products and shipping charges,
net of es mates for product returns and any related sales rebates. We es mate product returns based on historical return rates. Using probability
assessments, we es mate sales rebates expected to be paid over the term of the contract. The majority of our contracts have a single performance
obliga on and are short term in nature. Sales taxes that are collected from customers and remi ed to governmental authori es are accounted for on a
net basis and therefore are excluded from net sales. We offer certain customers cash discounts and volume rebates as sales incen ves. The discounts and
volume rebates are recorded as a reduc on in sales at the me revenue is recognized in an amount es mated based on historical experience and
contractual obliga ons.
Shipping and Handling - All shipping and handling amounts billed to customers are included in revenues. Costs incurred related to the shipping and the
handling of products are included in cost of sales.
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Con nued)
HAWKINS, INC.
Fair Value Measurements - The financial assets and liabili es that are re-measured and reported at fair value for each repor ng period are an interest
rate swap and marketable securi es. There are no fair value measurements with respect to nonfinancial assets or liabili es that are recognized or
disclosed at fair value in our consolidated financial statements on a recurring basis.
Assets and liabili es measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valua on as
of the measurement date:
Level 1: Valua on is based on quoted prices in ac ve markets for iden cal assets or liabili es.
Level 2: Valua on is based on quoted prices in ac ve markets for similar assets or liabili es, or quoted prices for iden cal or similar assets or
liabili es in markets that are not ac ve, or inputs other than quoted prices that are observable or can be corroborated by observable market data for
the asset or liability.
Level 3: Valua on is based upon unobservable inputs for the asset or liability that are supported by li le or no market ac vity. These fair values are
determined using pricing models for which the assump ons u lize management’s es mates or market par cipant assump ons.
In making fair value measurements, observable market data must be used when available. When inputs used to measure fair value fall within different
levels of 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
value measurement.
Cash Equivalents - Cash equivalents include all liquid debt instruments (primarily cash funds and money market accounts) purchased with an original
maturity of three months or less. The cash balances, maintained at large commercial banking ins tu ons with strong credit ra ngs, typically exceed
federally insured limits.
Trade Receivables and Concentra ons of Credit Risk - Financial instruments, which poten ally subject us to a concentra on of credit risk, principally
consist of trade receivables. We sell our principal products to a large number of customers in many different industries. As of April 2, 2023, we had a
significant concentra on of credit risk, with a single customer represen ng approximately 15% of our total trade receivables. There are no other
concentra ons of credit risk with other single customers from a par cular service or geographic area that would significantly impact us in the near term.
To reduce credit risk, we rou nely assess the financial strength of our customers. Receivables are reported net of an allowance for credit losses as
determined by management at the end of each repor ng period. Our receivable allowance is based on an es mate of expected credit losses, with the
es mate based on a number of qualita ve and quan ta ve factors that, based on collec on experience, may have an impact on repayment risk and
ability to collect.
Inventories - Inventories, consis ng primarily of finished goods, are primarily valued at the lower of cost or net realizable value, with cost for
approximately 79% of our inventory determined using the last-in, first-out (“LIFO”) method. Cost for the other 21% of our total inventory is determined
using the first-in, first-out (“FIFO”) method.
Leases - We determine if an arrangement is a lease at incep on. Right-of-use ("ROU") assets include opera ng leases. Lease liabili es for opera ng leases
are classified in "short-term lease liabili es" and "long-term lease liabili es" in our consolidated balance sheet.
ROU assets and related liabili es are recognized at commencement date based on the present value of the lease payments over the lease term. As most
of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the informa on available at commencement date in
determining the present value of lease payments. Lease terms may include op ons to extend or terminate the lease when it is reasonably certain that we
will exercise that op on. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Lease and non-lease components are generally accounted for separately for real estate leases. For non-real estate leases, we account for the lease and
non-lease components as a single lease component.
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Con nued)
HAWKINS, INC.
Property, Plant and Equipment - Property is stated at cost and depreciated or amor zed over the lives of the assets, using the straight-line method.
Es mated lives are generally: 10 to 40 years for buildings and improvements; 3 to 20 years for machinery and equipment; and 3 to 10 years for
transporta on equipment and office furniture and equipment including computer systems. Leasehold improvements are amor zed over the lesser of
their es mated useful lives or the remaining lease term. Deprecia on and amor za on expense is recorded in our Consolidated Statement of Income
within cost of goods sold and selling, general and administra ve expense, depending on the use of the underlying asset. We recorded deprecia on
expense of $20.5 million for fiscal 2023, $17.7 million for fiscal 2022 and $16.8 million for fiscal 2021.
Significant improvements that add to produc ve capacity or extend the lives of proper es are capitalized. Costs for repairs and maintenance are charged
to expense as incurred. When property is re red or otherwise disposed of, the cost and related accumulated deprecia on or amor za on are removed
from the accounts 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
occur that indicate the carrying value of the asset group may not be recoverable, such as prolonged industry downturn or significant reduc ons in
projected future cash 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-tax cash flows (undiscounted) of the related asset group. If these cash flows are less than the carrying value of such asset group, an
impairment loss would be measured by the amount the carrying value exceeds the fair value of the long-lived asset group. The measurement of
impairment requires us to es mate future cash flows and the fair value of long-lived assets. We did not incur any asset write-off charge in fiscal 2023 or
fiscal 2022 related to the impairment of long-lived assets, and incurred immaterial write-off charges in fiscal 2021.
Goodwill and Iden fiable Intangible Assets - Goodwill represents the excess of the cost of acquired businesses over the fair value of iden fiable tangible
net assets and iden fiable intangible assets purchased. Goodwill is tested at least annually for impairment 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 is as of the first day of our fourth fiscal
quarter. As of January 2, 2023, we performed an analysis of qualita ve factors for our Industrial, Water Treatment and Health and Nutri on repor ng
units to determine whether it is more likely than not that the fair value of either of these repor ng units was less than its carrying amount as a basis for
determining whether it is necessary to perform a quan ta ve goodwill impairment test. Based on management’s analysis of qualita ve factors, we
determined that it was not necessary to perform a quan ta ve goodwill impairment test for any of these repor ng units.
Goodwill impairment assessments were also completed in the fourth quarters of fiscal 2022 and 2021 and, similarly, we did not record a goodwill
impairment charge.
Our primary iden fiable intangible assets include customer rela onships, trademarks and tradenames acquired in previous business acquisi ons.
Iden fiable intangible assets with finite lives are amor zed whereas iden fiable intangible assets with indefinite lives are not amor zed. The values
assigned to the intangible assets with finite lives are being amor zed on average over a remaining useful life of approximately 11 years. Iden fiable
intangible assets that are subject to amor za on are evaluated for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. No such events or changes in circumstances occurred during fiscal 2023, 2022 or 2021. Iden fiable intangible assets not
subject to amor za on are tested for impairment annually or more frequently if events warrant. The impairment test consists of a qualita ve assessment
to determine whether it is more likely than not that the asset is impaired. Based on management’s analysis of qualita ve factors, we determined that it
was not necessary to perform an annual quan ta ve impairment test for fiscal 2023, 2022 or 2021.
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Con nued)
HAWKINS, INC.
Income Taxes - Deferred taxes are provided for differences between the financial statement and tax basis of assets and liabili es using enacted tax rates in
effect for the year in which the differences are expected to reverse. A valua on allowance is provided to offset deferred tax assets if, based on the
available evidence, it is more likely than not that some or all of the value of the deferred tax assets will not be realized. We record any interest and
penal es related to income taxes as income tax expense in the consolidated statements of income.
Stock-Based Compensa on - We account for stock-based compensa on on a fair value basis. The es mated grant date fair value of each stock-based
award is recognized in expense over the requisite service period (generally the ves ng period). Non-vested share awards are recorded as expense over
the requisite service periods based on the stock price 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 assumed to be issued as performance units and restricted stock.
Basic and diluted EPS were calculated using the following:
Weighted average common shares outstanding — basic
Dilu ve impact of stock performance units and restricted stock
Weighted average common shares outstanding — diluted
April 02, 2023
April 03, 2022
March 28, 2021
20,848,077
166,828
21,014,905
20,947,234
188,024
21,135,258
21,024,344
235,952
21,260,296
There were no shares or stock op ons excluded from the calcula on of weighted average common shares for diluted EPS for fiscal 2023, 2022 or 2021.
Deriva ve Instruments and Hedging Ac vi es - We are subject to interest rate risk associated with our variable rate debt. We have in place an interest
rate swap agreement which 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 por on of our variable-rate debt. The interest rate swap is measured at fair value on the contract date and is subsequently remeasured to fair value
at each repor ng date. Changes in the fair value of a deriva ve that is highly effec ve, and that is designated and qualifies as a cash flow hedge, are
recorded in other comprehensive income, un l the consolidated statement of income is affected by the variability in cash flows of the designated hedged
item. To the extent that the hedge is ineffec ve, changes in the fair value are recognized in the Statement of Income.
Recently Issued Accoun ng Pronouncements
We do not expect that any recently issued accoun ng pronouncements will have a material effect on our financial statements.
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Con nued)
HAWKINS, INC.
Note 2 — Asset Sales and Acquisi ons
Sale of bleach packaging assets: On March 30, 2023, we sold certain assets in our Industrial segment related to our consumer bleach packaging business
for $7 million. These assets were not core to our Industrial segment opera ons, where we tend to focus our manufacturing opera ons on bulk products.
The assets sold included plant equipment, inventory and intangible assets, all related to the packaging of bleach. We realized a gain of $3 million on this
sale, which has been recorded within selling, general and administra ve expenses.
Acquisi on of NAPCO Chemical Company, Inc.: In the fourth quarter of fiscal 2022, we acquired substan ally all the assets of NAPCO Chemical Company,
Inc. ("NAPCO") for $19.0 million, under the terms of an asset purchase agreement with NAPCO and certain other par es thereto, to further the
geographic reach of our Water Treatment segment. NAPCO manufactured and distributed water treatment chemicals from three loca ons in Texas. The
results of opera ons since the acquisi on date, and the assets, including the goodwill associated with this acquisi on, are included in our Water
Treatment segment. Costs associated with this transac on were not material and were expensed as incurred.
The acquisi on was accounted for as a business combina on, under which the total purchase price is allocated to the net tangible and intangible assets
and liabili es of NAPCO acquired in connec on with the acquisi on based on their es mated fair values. We es mated the fair values of the assets
acquired and liabili es assumed using a discounted cash flow analysis (income approach). Of the total $19 million purchase price, we allocated
$9.4 million to finite-lived intangible assets, primarily customer rela onships to be amor zed over 18 years, $3.6 million to property, plant and equipment
and $1.5 million to net working capital. The residual amount of $4.5 million was allocated to goodwill. The goodwill recognized as a result of this
acquisi on is primarily a ributable to strategic and synergis c benefits, as well as the assembled workforce. Such goodwill is expected to be deduc ble
for tax purposes.
Acquisi on of Water and Waste Special es, Inc.: In the third quarter of fiscal 2022, we acquired substan ally all the assets of Water and Waste
Special es, Inc., under the terms of a purchase agreement with Water and Waste Special es and its shareholders, to further the geographic reach of our
Water Treatment segment. We paid $1.4 million at closing for the acquisi on. Water and Waste Special es was a water treatment chemical distribu on
company opera ng primarily in Alabama. The results of opera ons since the acquisi on date, and the assets, including the goodwill associated with this
acquisi on, are included in our Water Treatment segment. Costs associated with this transac on were not material and were expensed as incurred.
Acquisi on of Southeast Water Systems LLC: In the second quarter of fiscal 2022, we acquired substan ally all the assets of Southeast Water Systems LLC,
under the terms of an asset purchase agreement with Southeast Water Systems and its shareholders, to further the geographic reach of our Water
Treatment segment. We paid $1.2 million at closing for the acquisi on and may pay up to an addi onal $1.0 million over the three years following the
acquisi on date based on achieving certain goals. Southeast Water Systems supplied and installed water treatment chemical equipment to its customers
located primarily in Alabama, southern Georgia and the Florida panhandle. The results of opera ons since the acquisi on date, and the assets, including
the goodwill associated with this acquisi on, are included in our Water Treatment segment. Costs associated with this transac on were not material and
were expensed as incurred.
Acquisi on of C&L Aqua Professionals, Inc. and LC Blending, Inc.: In fiscal 2021, we acquired substan ally all the assets of C&L Aqua Professionals, Inc.
and LC Blending, Inc. (together, "C&L Aqua") under the terms of an asset purchase agreement among us, C&L Aqua and its shareholders, to further the
geographic reach of our Water Treatment segment. We paid $16 million for the acquisi on. C&L Aqua was a water treatment chemical distribu on
company opera ng primarily in Louisiana. The results of opera ons since the acquisi on date, and the assets, including the goodwill associated with this
acquisi on, are included in our Water Treatment segment. Costs associated with this transac on were not material and were expensed as incurred.
Acquisi on of Property: In fiscal 2021, we acquired a manufacturing facility on 28 acres located adjacent to our facility in Rosemount, Minnesota to allow
further expansion and growth in both our Industrial and Water Treatment segments. We paid $10 million for the property. The purchase of this facility
added approximately 40,000 square feet of manufacturing and warehouse space to bring us to a total of 105,000 square feet of space at that me on 56
acres of land in the area, with rail access at both of the sites to allow for future growth and provide for supply chain flexibility on certain raw materials to
be er serve our customers.
Acquisi on of American Development Corpora on of Tennessee, Inc.: In fiscal 2021, we acquired substan ally all the assets of American Development
Corpora on of Tennessee, Inc. (“ADC”) under the terms of an asset purchase agreement among us, ADC and its shareholders, to further the geographic
reach of our Water Treatment segment. We paid $25 million for the acquisi on. ADC was a water treatment chemical distribu on company opera ng
primarily in Tennessee, Georgia and Kentucky. The results of opera ons since the acquisi on date, and the assets, including the goodwill associated with
this acquisi on, are included in our Water Treatment segment. Costs associated with this transac on were not material and were expensed as incurred.
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Con nued)
HAWKINS, INC.
Note 3 — Revenue
Our revenue arrangements generally consist of a single performance obliga on to transfer promised goods or services. We disaggregate revenues from
contracts with customers by both opera ng segments and types of product sold. Repor ng by opera ng segment is per nent to understanding our
revenues, as it aligns to how we review the financial performance of our opera ons. Types of products sold within each opera ng segment help us to
further evaluate the financial performance of our segments.
The following table disaggregates external customer net sales by major revenue stream:
(In thousands)
Manufactured, blended or repackaged products
Distributed specialty products
(3)
Bulk products
Other
(2)
(1)
Total external customer sales
(In thousands)
Manufactured, blended or repackaged products
Distributed specialty products
(3)
Bulk products
Other
Total external customer sales
(2)
(1)
(In thousands)
Manufactured, blended or repackaged products
Distributed specialty products
(3)
Bulk products
Other
(2)
(1)
Total external customer sales
Industrial
383,612
—
77,479
9,669
470,760
Industrial
318,514
—
61,443
6,981
386,938
Industrial
231,427
—
38,378
3,556
273,361
$
$
$
$
$
$
Fiscal Year Ended April 2, 2023:
Health and
Nutri on
Water
Treatment
271,448
—
27,996
5,481
304,925
$
$
48,575
109,468
—
1,370
159,413
Fiscal Year Ended April 3, 2022:
Health and
Nutri on
Water
Treatment
205,350
—
20,211
2,572
228,133
$
$
34,690
124,312
—
468
159,470
Fiscal Year Ended March 28, 2021:
Health and
Nutri on
Water
Treatment
152,694
—
16,067
1,243
170,004
$
$
38,270
115,317
—
(81)
153,506
$
$
$
$
$
$
$
$
$
$
$
$
Total
703,635
109,468
105,475
16,520
935,098
Total
558,554
124,312
81,654
10,021
774,541
Total
422,391
115,317
54,445
4,718
596,871
(1) For our Industrial and Water Treatment segments, this line includes our non-bulk specialty products that we either manufacture, blend, repackage, resell in their
original form, or direct ship to our customers in smaller quan es, and services we provide for our customers. For our Health and Nutri on segment, this line
includes products manufactured, processed or repackaged in our facility and/or with our equipment.
(2) This line includes non-manufactured distributed specialty products in our Health and Nutri on segment, which may be sold out of one of our facili es or direct
shipped to our customers.
(3) This line includes bulk products in our Industrial and Water Treatment segments that we do not modify in any way, but receive, store, and ship from our facili es,
or direct ship to our customers in large quan es.
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Con nued)
HAWKINS, INC.
Note 4 — Deriva ve Instruments
We have in place an interest rate swap agreement to manage the risk associated with a por on of our variable-rate long-term debt. We do not u lize
deriva ve instruments for specula ve purposes. The interest rate swap involves the exchange of fixed-rate and variable-rate payments without the
exchange of the underlying no onal amount on which the interest payments are calculated. The no onal amount of the swap agreement is $60 million
and it will terminate on May 1, 2027. We have designated this swap as a cash flow hedge and have determined that it qualifies for hedge accoun ng
treatment. For so long as the hedge is effec ve, changes in fair value of the cash flow hedge are recorded in other comprehensive income or loss (net of
tax) un l income or loss from the cash flows of the hedged item is realized.
We previously had in place an interest rate swap agreement to manage the risk associated with a por on of our variable-rate long-term debt. The
$20 million swap agreement terminated on December 23, 2020. We had designated this swap as a cash flow hedge and determined that it qualified for
hedge accoun ng treatment.
For fiscal 2023, 2022 and 2021, we recorded $1.6 million, $1.3 million, and $0.1 million, respec vely, in other comprehensive income related to unrealized
gains (net of tax) on the cash flow hedge. Included in other long-term assets on our consolidated balance sheet was $4.0 million as of April 2, 2023 and
$1.8 million as of April 3, 2022.
By their nature, deriva ve instruments are subject to market risk. Deriva ve instruments are also subject to credit risk associated with counterpar es to
the deriva ve contracts. Credit risk associated with deriva ves is measured based on the replacement cost should the counterparty with a contract in a
gain posi on to us fail to perform under the terms of the contract. While the current interest rate swap is in effect, we do not an cipate nonperformance
by the counterparty.
Note 5 – Fair Value Measurements
Our financial assets and liabili es are measured at fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transac on between market par cipants 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 our credit facility, our debt also approximates fair value.
Assets and Liabili es Measured at Fair Value on a Recurring Basis. The fair value hierarchy requires the use of observable market data when available.
In instances where inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined
based on the lowest level input that is significant to the fair value measurement in its en rety. Our assessment of the significance of a par cular item to
the fair value measurement in its en rety requires judgment, including the considera on 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 compensa on re rement
plan. Both of these assets are classified as other long-term assets on our balance sheet, with the por on of the deferred compensa on re rement plan
assets expected to be paid within twelve months classified as current assets. The fair value of the interest rate swap is determined by the respec ve
counterpar es based on interest rate changes. Interest rate swaps are valued based on observable interest rate yield curves for similar instruments. The
deferred compensa on plan assets relate to contribu ons made to a non-qualified compensa on plan on behalf of certain employees who are classified
as “highly compensated employees” as determined by IRS guidelines. The assets are part of a rabbi trust and the funds are held in mutual funds. The fair
value of the deferred compensa on 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 measured at fair value on a recurring basis as of April 2, 2023 and April 3, 2022.
(In thousands)
Assets
Deferred compensa on plan assets
Interest rate swap
0
April 2, 2023
April 3, 2022
Level 1
Level 2
$
7,659
4,028
$
7,038
1,769
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Con nued)
HAWKINS, INC.
Note 6 — Inventories
Inventories at April 2, 2023 and April 3, 2022 consisted of the following:
(In thousands)
Inventory (FIFO basis)
LIFO reserve
Net inventory
2023
2022
$
$
128,589 $
(39,812)
88,777 $
116,325
(21,340)
94,985
The FIFO value of inventories accounted for under the LIFO method was $101.4 million at April 2, 2023 and $83.7 million at April 3, 2022. The remainder
of the inventory was valued and accounted for under the FIFO method.
Note 7 — Goodwill and Other Iden fiable Intangible Assets
The carrying amount of goodwill for each of our three reportable segments were as follows:
(In thousands)
Balance as of March 28, 2021
Industrial
$
Addi on due to acquisi ons
Balance as of April 3, 2022 and April 2, 2023
$
Water Treatment
Health and Nutri on
Total
6,495 $
—
6,495 $
19,280 $
6,681
25,961 $
44,945 $
—
44,945 $
70,720
6,681
77,401
The following is a summary of our iden fiable intangible assets as of April 2, 2023 and April 3, 2022:
(In thousands)
Finite-life intangible assets:
Customer rela onships
Trademarks and trade names
Other finite-life intangible assets
Total finite-life intangible assets
Indefinite-life intangible assets
Total intangible assets, net
(In thousands)
Finite-life intangible assets:
Customer rela onships
Trademarks and trade names
Other finite-life intangible assets
Total finite-life intangible assets
Indefinite-life intangible assets
Total intangible assets, net
Gross Amount
2023
Accumulated
Amor za on
Net carrying value
109,107 $
6,370
3,904
119,381
1,227
120,608 $
(38,377) $
(5,267)
(3,904)
(47,548)
—
(47,548) $
70,730
1,103
—
71,833
1,227
73,060
Gross Amount
2022
Accumulated
Amor za on
Net carrying value
109,644 $
6,370
3,904
119,918
1,227
121,145 $
(32,399) $
(4,746)
(3,807)
(40,952)
—
(40,952) $
77,245
1,624
97
78,966
1,227
80,193
$
$
$
$
Intangible asset amor za on expense was $6.9 million during fiscal 2023, $6.5 million during fiscal 2022, and $5.8 million during fiscal 2021.
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Con nued)
HAWKINS, INC.
The es mated future amor za on expense for iden fiable intangible assets is as follows:
(In thousands)
Fiscal 2024
Fiscal 2025
Fiscal 2026
Fiscal 2027
Fiscal 2028
Therea er
Total
Note 8 – Debt
Intangible Assets
6,680
$
6,680
6,579
6,279
6,184
39,431
71,833
$
We have in place a Credit Agreement with U.S. Bank as Sole Lead Arranger and Sole Book Runner, and other lenders from me to me party thereto,
whereby U.S. Bank is also serving as Administra ve Agent. The Credit Agreement provides us with a “Revolving Loan Facility” totaling $250.0 million. The
Revolving Loan Facility includes a $10 million le er of credit subfacility and $25 million swingline subfacility. The Revolving Loan Facility has a five-year
maturity date, maturing on April 30, 2027. The Revolving Loan Facility is secured by substan ally all of our personal property assets and those of our
subsidiaries.
At April 2, 2023, the effec ve interest rate on our borrowings was 4.3%. In addi on to paying interest on the outstanding principal under the Revolving
Loan Facility, we are required to pay a commitment fee on the unu lized commitments thereunder. The commitment fee is between 0.15% and 0.25%,
depending on our leverage ra o.
Debt issuance costs of $0.3 million paid to the lenders in connec on with the Credit Agreement, as well as unamor zed debt issuance costs of
$0.1 million paid in connec on with the previous credit facility, are reflected as a reduc on of debt and are being amor zed as interest expense over the
term of the Revolving Loan Facility.
The Credit Agreement requires us to maintain (a) a minimum fixed charge coverage ra o of 1.15 to 1.00 and (b) a maximum total cash flow leverage ra o
of 3.0 to 1.0. The Credit Agreement also contains other customary affirma ve and nega ve covenants, including covenants that restrict our ability to incur
addi onal indebtedness, dispose of significant assets, make certain investments, including any acquisi ons other than permi ed acquisi ons, make
certain payments, enter into sale and leaseback transac ons, grant liens on our assets or enter into rate management transac ons, subject to certain
limita ons. We are permi ed to make distribu ons, pay dividends and repurchase shares so long as no default or event of default exists or would exist as
a result thereof. As of April 3, 2022, we were in compliance with all required covenants.
Debt at April 2, 2023 and April 3, 2022 consisted of the following:
(In thousands)
Senior secured revolving loan
Less: unamor zed debt issuance costs
Total debt, net of debt issuance costs
Less: current por on of long-term debt, net of current unamor zed debt issuance costs
Total long-term debt
April 2, 2023
April 3, 2022
$
$
112,000
(356)
111,644
(9,913)
101,731
$
$
126,000
(443)
125,557
(9,913)
115,644
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Con nued)
HAWKINS, INC.
Note 9 — Share-Based Compensa on
Performance-Based Restricted Stock Units. Our Board of Directors has approved a performance-based equity compensa on arrangement for our
execu ve officers. This performance-based arrangement provides for the grant of performance-based restricted stock units that represent a possible
future issuance of restricted shares of our common shares based on our pre-tax income target for the applicable fiscal year. The actual number of
restricted shares to be issued to each execu ve officer will be determined when our final financial informa on becomes available a er the applicable
fiscal year and will be between zero shares and 76,863 shares in the aggregate for fiscal 2023. The restricted shares issued, if any, will fully vest two years
a er the end of the fiscal year on which the performance is based. We record the compensa on expense for the outstanding performance share units
and then-converted restricted stock over the life of the awards.
The following table represents the restricted stock ac vity for fiscal 2021, 2022, and 2023:
Outstanding at beginning of fiscal 2021
Granted
Vested
Forfeited
Outstanding at end of fiscal 2021
Granted
Vested
Forfeited
Outstanding at end of fiscal 2022
Granted
Vested
Forfeited
Outstanding at end of fiscal 2023
Shares
149,030 $
129,626
(10,526)
(29,010)
239,120 $
111,618
(123,002)
(13,258)
214,478 $
88,524
(102,860)
(10,884)
189,258 $
Weighted-
Average Grant
Date Fair Value
17.13
18.69
15.68
17.92
17.94
31.74
17.25
18.69
25.48
38.31
18.69
34.68
34.64
We recorded compensa on expense on performance-based restricted stock of approximately $2.8 million for fiscal 2023, $2.9 million for fiscal 2022 and
$2.5 million for fiscal 2021, substan ally all of which was recorded in SG&A expense in the Consolidated Statements of Income. The total fair value of
performance-based restricted stock units vested was $1.9 million in fiscal 2023, $2.1 million in fiscal 2022 and $0.2 million in fiscal 2021.
Un l the performance-based restricted stock units result in the issuance of restricted stock, the amount of expense recorded each period is dependent
upon our es mate of the number of shares that will ul mately be issued and our then current common share price. Upon issuance of restricted stock, we
record compensa on expense over the remaining ves ng period using the award date closing price. Unrecognized compensa on expense related to non-
vested restricted stock and non-vested restricted share units as of April 2, 2023 was $2.8 million and is expected to be recognized over a weighted average
period of 0.9 years.
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Con nued)
HAWKINS, INC.
Restricted Stock Awards. As part of their retainer, our directors, other than the Chief Execu ve Officer, receive restricted stock for their Board services.
The restricted stock awards are expensed over a one-year ves ng period, based on the market value on the date of grant.
The following table represents the Board’s restricted stock ac vity for fiscal 2021, 2022, and 2023:
Outstanding at beginning of fiscal 2021
Granted
Vested
Forfeited
Outstanding at end of fiscal 2021
Granted
Vested
Outstanding at end of fiscal 2022
Granted
Vested
Outstanding at end of fiscal 2023
Shares
16,016 $
13,186
(16,016)
(1,958)
11,228 $
10,287
(11,228)
10,287 $
12,565
(10,287)
12,565 $
Weighted-
Average Grant
Date Fair Value
21.84
25.59
21.84
25.53
25.60
32.80
25.60
32.80
38.98
32.80
38.98
Annual expense related to the value of restricted stock was $0.4 million in fiscal 2023, and $0.3 million in fiscal 2022 and 2021, and was recorded in SG&A
expense in the Consolidated Statements of Income. Unrecognized compensa on expense related to non-vested restricted stock awards as of April 2, 2023
was $0.2 million and is expected to be recognized over a weighted average period of 0.3 years.
Note 10 — Share Repurchases
Our board of directors has authorized the repurchase of up to 2,600,000 shares of our outstanding common shares. The shares may be repurchased on
the open market or in privately nego ated transac ons subject to applicable securi es laws and regula ons. Upon repurchase of the shares, we reduce
our common shares for the par value of the shares with the excess applied against addi onal paid-in capital. We repurchased 181,657 common shares at
an aggregate purchase price of $6.6 million during fiscal 2023. We repurchased 240,501 common shares at an aggregate purchase price of $8.5 million
during fiscal 2022. We repurchased 166,088 common shares at an aggregate purchase price of $4.1 million during fiscal 2021. As of April 2, 2023, the
number of shares available to be purchased under the share repurchase program was 1,129,348.
Note 11 — Profit Sharing, Employee Stock Ownership, Employee Stock Purchase and Pension Plans
Company Sponsored Plans. The majority of our non-bargaining unit employees are eligible to par cipate in a company-sponsored profit sharing plan.
Contribu ons are made at our discre on subject to a maximum amount allowed under the Internal Revenue Code (“IRC”). The profit sharing plan
contribu on level for each employee depends upon date of hire, and was 2.5% or 5.0% of each employee’s eligible compensa on for fiscal 2023, 2022
and 2021. We also have in place a re rement plan covering our collec ve bargaining unit employees. The re rement plan provides for a contribu on of
2.5% or 5.0% of each employee’s eligible annual wages depending on their hire date. In addi on to the employer contribu ons described above, both the
profit sharing plan and the re rement plan include a 401(k) plan that allows employees to contribute pre-tax earnings up to the maximum amount
allowed under the IRC, with an employer match of up to 5% of the employee’s eligible compensa on.
We have two employee stock ownership plans (“ESOPs”), one covering the majority of our non-bargaining unit employees and the other covering our
collec ve bargaining unit employees. Contribu ons to the plan covering our non-bargaining unit employees are made at our discre on. Contribu ons to
both 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
eligible employee’s hire date, for fiscal 2023, 2022 and 2021.
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Con nued)
HAWKINS, INC.
We have a nonqualified deferred compensa on plan covering employees who are classified as “highly compensated employees” as determined by IRS
guidelines for the plan year and who were hired on or before April 1, 2012. Employees who are eligible for the nonqualified deferred compensa on plan
for any plan year are not eligible for the profit sharing plan contribu on or the ESOP contribu ons described above for that plan year. Our contribu on to
the nonqualified deferred compensa on plan for fiscal 2023, 2022 and 2021 was 10% of each employee’s eligible compensa on, subject to the maximum
amount allowed under the IRC.
We have an employee stock purchase plan (“ESPP”) covering substan ally all of our employees. The ESPP allows employees to purchase newly-issued
shares of the Company’s common shares at a discount from market. The number of new shares issued under the ESPP was 65,597 in fiscal 2023, 71,692 in
fiscal 2022 and 88,148 in fiscal 2021.
contribu on expense
the
following
represents
The
(In thousands)
Non-bargaining unit employee plans:
Profit sharing
401(k) matching contribu ons
ESOP
Nonqualified deferred compensa on plan
Bargaining unit employee plans
ESPP - all employees
Total contribu on expense
for
these
company-sponsored plans
for fiscal 2023, 2022
and 2021:
2023
2022
2021
$
$
1,067 $
3,247
1,067
1,633
618
619
8,251 $
1,056 $
3,122
1,056
1,355
589
549
7,727 $
994
2,650
994
1,327
555
556
7,076
In 2013, we withdrew from a collec vely bargained mul employer pension plan and recorded a liability for our share of the unfunded vested benefits.
Payments of approximately $0.5 million per year are being made through 2034.
Note 12 — Commitments and Con ngencies
Li ga on. As of April 2, 2023, there were no material pending legal proceedings, other than ordinary rou ne li ga on incidental to the business, to
which we or any of our subsidiaries are a party or of which any of our property is the subject. Legal fees associated with such ma ers are expensed as
incurred.
Asset Re rement Obliga ons. We have three leases of land which contain terms that state that at the end of the lease term, we have a specified amount
of me to remove the property and buildings. Including available lease extensions, these leases expire in 2024, 2033 and 2044. At that me, anything that
remains on the land becomes the property of the lessor, and the lessor has the op on to either maintain the property or remove the property at our
expense. We have not been able to reasonably es mate the fair value of the asset re rement obliga ons, primarily due to the combina on of the
following factors: certain of the leases 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 expira on of the lease periods; the lessors do not have a history of termina ng leases with their tenants; and because it is more likely than not
that the buildings will have value at the end of the lease life and therefore, may not be removed by either the lessee or the lessor. Therefore, in
accordance with accoun ng guidance related to asset re rement and environmental obliga ons, we have not recorded an asset re rement obliga on as
of April 2, 2023. We will con nue to monitor the factors surrounding the requirement to record an asset re rement obliga on and will recognize the fair
value of a liability in the period in which it is incurred and a reasonable es mate can be made.
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Con nued)
HAWKINS, INC.
Note 13 — Income Taxes
The provisions for income taxes for fiscal 2023, 2022 and 2021 were as follows:
(In thousands)
Federal — current
State — current
Total current
Federal — deferred
State — deferred
Total deferred
Total provision
2023
2022
2021
$
$
15,072 $
7,701
22,773
704
(936)
(232)
22,541 $
14,736 $
5,202
19,938
(1,054)
(447)
(1,501)
18,437 $
11,169
4,391
15,560
(302)
(387)
(689)
14,871
Reconcilia ons of the provisions for income taxes to the applicable federal statutory income tax rate for fiscal 2023, 2022 and 2021 are listed below.
2023
2022
2021
Statutory federal income tax
State income taxes, net of federal deduc on
ESOP dividend deduc on on allocated shares
Other — net
Total
21.0 %
6.8 %
(0.2)%
(0.3)%
27.3 %
21.0 %
5.6 %
(0.2)%
(0.1)%
26.3 %
The tax effects of items comprising our net deferred tax liability as of April 2, 2023 and April 3, 2022 are as follows:
(In thousands)
Deferred tax assets:
2023
2022
Trade receivables
Stock compensa on accruals
Pension withdrawal liability
Lease liability
Inventories
Other
Total deferred tax assets
Deferred tax liabili es:
Inventories
Prepaid expenses
Excess of tax over book deprecia on
Intangible assets
ROU asset
Unrealized gain on interest rate swap
Total deferred tax liabili es
Net deferred tax liabili es
$
$
$
$
$
51 $
2,027
1,155
2,820
2,437
3,335
11,825 $
— $
(1,089)
(16,360)
(14,334)
(2,754)
(1,087)
(35,624) $
(23,799) $
21.0 %
5.9 %
(0.2)%
(0.1)%
26.6 %
99
1,823
1,250
2,916
—
3,097
9,185
(1,288)
(937)
(12,234)
(14,806)
(2,864)
(478)
(32,607)
(23,422)
As of April 2, 2023, the Company has determined that it is more likely than not that the deferred tax assets at April 2, 2023 will be realized either through
future taxable income or reversals of taxable temporary differences.
We are subject to U.S. federal income tax as well as income tax of mul ple state jurisdic ons. The tax years prior to our fiscal year ended March 29, 2020
are closed to examina on by the Internal Revenue Service, and with few excep ons, state and local income tax jurisdic ons.
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Con nued)
HAWKINS, INC.
Note 14 – Leases
Lease Obliga ons. As of April 2, 2023, we were obligated under opera ng lease agreements for certain manufacturing facili es, warehouse space, the
land on which some of our facili es sit, vehicles and informa on technology equipment. Our leases have remaining lease terms of 1 year to 22 years,
some of which include op ons to extend the lease for up to 15 years.
As of April 2, 2023 and April 3, 2022, our opera ng lease components with ini al or remaining terms in excess of one year were classified on the
consolidated balance sheet within right-of-use assets, short-term lease liability and long-term lease liability.
Total lease expense was $3.1 million for the twelve months ended April 2, 2023 and $2.9 million for the twelve months ended April 3, 2022, and includes
leases less than 12 months in dura on.
Other informa on related to our opera ng leases was as follows:
Lease Term and Discount Rate
Weighted average remaining lease term (years)
Weighted average discount rate
Maturi es of lease liabili es as of April 2, 2023 were as follows:
(In thousands)
Fiscal 2024
Fiscal 2025
Fiscal 2026
Fiscal 2027
Fiscal 2028
Therea er
Total
Less: Interest
Present value of lease liabili es
42
April 2, 2023
April 3, 2022
7.84
2.8 %
8.91
2.6 %
Opera ng Leases
1,932
1,742
1,599
1,340
1,282
3,862
11,757
(1,313)
10,444
$
$
$
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Con nued)
HAWKINS, INC.
Note 15 — Segment Informa on
We have three reportable segments: Industrial, Water Treatment and Health and Nutri on. The accoun ng policies of the segments are the same as
those described in the summary of significant accoun ng policies. Product costs and expenses for each segment are based on actual costs incurred along
with cost alloca ons of shared and centralized func ons.
We evaluate performance based on opera ng income. Reportable segments are defined primarily by product and type of customer. Segments are
responsible for the sales, marke ng and development of their products and services. Other than our Health and Nutri on segment, the segments do not
have separate customer service or purchasing func ons. There are no intersegment sales and no opera ng segments have been aggregated.
Reportable Segments
(In thousands)
Fiscal Year Ended April 2, 2023:
Sales
Gross profit
Selling, general, and administra ve expenses
Opera ng income
Iden fiable assets*
Capital expenditures
Fiscal Year Ended April 3, 2022:
Sales
Gross profit
Selling, general, and administra ve expenses
Opera ng income
Iden fiable assets*
Capital expenditures
Fiscal Year Ended March 28, 2021:
Sales
Gross profit
Selling, general, and administra ve expenses
Opera ng income
Iden fiable assets*
Capital expenditures
Industrial
Water
Treatment
Health and Nutri on
Total
$
$
$
$
$
$
$
$
$
470,760 $
68,115
25,703
42,412
253,436 $
31,635 $
386,938 $
59,606
28,127
31,479
236,934 $
18,812 $
273,361 $
43,337
27,033
16,304
181,478 $
13,713 $
304,925 $
67,208
35,734
31,474
155,430 $
16,311 $
228,133 $
54,571
31,357
23,214
143,889 $
8,939 $
170,004 $
46,793
24,453
22,340
109,761 $
6,732 $
159,413 $
29,796
15,532
14,264
155,626 $
375 $
159,470 $
32,343
15,842
16,501
167,034 $
761 $
153,506 $
33,632
16,398
17,234
166,558 $
349 $
935,098
165,119
76,969
88,150
564,492
48,321
774,541
146,520
75,326
71,194
547,857
28,512
596,871
123,762
67,884
55,878
457,797
20,794
* Unallocated assets not included, consis ng primarily of cash and cash equivalents,prepaid expenses, and non-qualified deferred compensa on plan
assets of $26.0 million at April 2, 2023, $19.5 million at April 3, 2022 and $14.8 million at March 28, 2021
43
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evalua on of Disclosure Controls and Procedures
As of the end of the period covered by this Annual Report on Form 10-K, we conducted an evalua on, under supervision and with the par cipa on of
management, including the chief execu ve officer and chief financial officer, of the effec veness of the design and opera on of our disclosure controls
and procedures pursuant to Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Based upon that evalua on, our chief execu ve officer and chief financial
officer concluded that our disclosure controls and procedures are effec ve. Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-
15(e) of the Exchange Act as controls and other procedures that are designed to ensure that informa on required to be disclosed by us in reports filed
with the SEC under the Exchange Act is recorded, processed, summarized and reported within the me periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limita on, controls and procedures designed to ensure that informa on required to be disclosed by
us in reports filed under the Exchange Act is accumulated and communicated to our management, including our principal execu ve and principal financial
officers, or person performing similar func ons, as appropriate to allow mely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Repor ng
Our management is responsible for establishing and maintaining adequate internal control over financial repor ng as defined in Rules 13a-15(f) and 15d-
15(f) of the Securi es Exchange Act. Our internal control over financial repor ng is designed to provide reasonable assurance regarding the reliability of
financial repor ng and the prepara on of financial statements for external purposes in accordance with generally accepted accoun ng principles. Our
internal control over financial repor ng includes those policies and procedures that (1) pertain to maintenance of records that, in reasonable detail,
accurately and fairly reflect the transac ons and disposi ons of our assets; (2) provide reasonable assurance that transac ons are recorded as necessary
to permit prepara on of the financial statements in accordance with generally accepted accoun ng principles, and that our receipts and expenditures are
being made only in accordance with authoriza ons of our management and directors; and (3) provide reasonable assurance regarding preven on or
mely detec on of unauthorized acquisi on, use or disposi on of our assets that could have a material effect on the financial statements.
Because of its inherent limita ons, internal control over financial repor ng may not prevent or detect misstatements. Projec ons of any evalua on of the
effec veness of internal control over financial repor ng to future periods are subject to the risk that the controls may become inadequate because of
changes in condi ons, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effec veness of our internal control over financial repor ng as of April 2, 2023, based on the criteria described in Internal
Control - Integrated Framework (2013) issued by the Commi ee of Sponsoring Organiza ons of the Treadway Commission. Based on this assessment,
management believes that our internal control over financial repor ng was effec ve as of April 2, 2023.
Our independent registered public accoun ng firm has issued an a esta on report on our internal control over financial repor ng for April 2, 2023 which
is included in the Report of Independent Registered Public Accoun ng Firm in Item 8 of this Annual Report on 10-K.
Changes in Internal Control Procedures
There was no change in our internal control over financial repor ng during the fourth quarter of fiscal 2023 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial repor ng.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable.
44
Certain informa on required by Part III is incorporated by reference from Hawkins’ defini ve Proxy Statement for the Annual Mee ng of Shareholders to
be held on August 2, 2023 (the “2023 Proxy Statement”). Except for those por ons specifically incorporated in this Form 10-K by reference to the 2023
Proxy Statement, no other por ons of the 2023 Proxy Statement are deemed to be filed as part of this Form 10-K.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Informa on about our Execu ve Officers
Our current execu ve officers, their ages and offices held, are set forth below:
Name
Patrick H. Hawkins
Jeffrey P. Oldenkamp
Richard G. Erstad
Drew M. Grahek
Douglas A. Lange
David J. Mangine
Shirley A. Rozeboom
Office
Chief Execu ve Officer and President
Execu ve Vice President, Chief Financial Officer and Treasurer
Vice President, General Counsel and Secretary
Vice President — Opera ons
Vice President — Water Treatment Group
Vice President — Industrial Group
Vice President — Health and Nutri on
Age
52
50
59
53
53
65
61
Patrick H. Hawkins has been our Chief Execu ve Officer and President and member of our board since 2011. Mr. Hawkins has held the posi on of
President since 2010. He joined the Company in 1992 and served as the Business Director - Food and Pharmaceu cals, a posi on he held from 2009 to
2010. Previously he served as Business Manager - Food and Co-Extrusion Products from 2007 to 2009 and Sales Representa ve - Food Ingredients from
2002 to 2007. He previously served the Company in various other capaci es, including Plant Manager, Quality Director and Technical Director.
Jeffrey P. Oldenkamp has been our Execu ve Vice President, Chief Financial Officer and Treasurer since October 2021. Mr. Oldenkamp joined Hawkins in
May 2017 and assumed the role of Chief Financial Officer, Vice President and Treasurer in June 2017. Prior to joining Hawkins, Mr. Oldenkamp was with
MTS Systems Corpora on, a supplier of high-performance test systems and sensors, where he served as Chief Financial Officer from 2015 to May 2017
and as Vice President of Finance for the MTS Test business from 2014 to 2015, and with Nilfisk-Advance, Inc., a global manufacturer of professional
cleaning equipment, where he served as Americas Opera ons Chief Financial Officer and Vice President from 2012 to 2014.
Richard G. Erstad has been our Vice President, General Counsel and Secretary since 2008. Mr. Erstad was General Counsel and Secretary of BUCA, Inc., a
restaurant company, from 2005 to 2008. Mr. Erstad had previously been an a orney with the corporate group of Faegre & Benson LLP, a law firm, from
1996 to 2005, where his prac ce focused on securi es law and mergers and acquisi ons. He is a member of the Minnesota Bar.
Drew M. Grahek has been our Vice President - Opera ons since September 2018. Prior to joining Hawkins, Mr. Grahek was Adjunct Faculty at the
University of Minnesota College of Con nuing Educa on and a Business Administrator in the Archdiocese of St. Paul and Minneapolis from June 2017 to
June 2018; Director of Service Opera ons and Supply Chain with Ulta Beauty, Inc. from April 2016 to June 2017; and Director of Stores with Field and
Stream Outdoor Stores, a division of Dick’s Spor ng Goods, Inc. from July 2015 to April 2016. Previously, he spent a total of 23 years at Target Corpora on
in a variety of opera ons, merchandising and property management posi ons.
Douglas A. Lange has been our Vice President - Water Treatment Group since June 2020. Prior to a aining this posi on, Mr. Lange served the Company as
General Manager and Product Development Manager for the Water Treatment Group a er joining the company in January 2019. Prior to joining the
Company, Mr. Lange was with H.B. Fuller Company, a global supplier of special adhesives, where he served as Global Marke ng Manager and Product
Manager for specialty markets in electronics and wood products from 2011 to January 2019. Mr. Lange served in various roles in the specialty adhesives
market for a total of 21 years prior to joining the Company.
45
David J. Mangine has been our Vice President - Industrial Group since 2021. Prior to a aining this posi on, Mr. Mangine served as the Industrial Sales
Manager from 2011 to 2021, a er joining Hawkins in 2000 as an Account Manager.
Shirley A. Rozeboom has been our Vice President - Health and Nutri on since 2019. Prior to a aining this posi on, Ms. Rozeboom held the posi on of
Senior Vice President of Sales for Stauber from 2012 to 2019, Director of Sales from 2008 to 2012 and Account Execu ve from 2000 to 2008.
The disclosure under the headings “Elec on of Directors,” “Corporate Governance,” and, if applicable, “Delinquent Sec on 16(a) Reports” of the 2022
Proxy 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 execu ve officer,
principal financial officer, controller and other persons performing similar func ons. We have posted the Code of Business Conduct and Ethics on our
website located at www.hawkinsinc.com. Hawkins’ Code of Business Conduct and Ethics is also available in print to any shareholder who requests it in
wri ng 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
and Ethics that applies to our principal execu ve officer, principal financial officer, controller and other persons performing similar func ons within four
business days following the date of such amendment or waiver. We are not including the informa on contained on our website as part of, or
incorpora ng it by reference into, this report.
ITEM 11. EXECUTIVE COMPENSATION
The disclosure under the heading “Compensa on of Execu ve Officers and Directors” in the 2023 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The disclosure under the headings “Security Ownership of Management and Beneficial Ownership” and “Equity Compensa on Plan Informa on” in the
2023 Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The disclosure under the headings “Elec on of Directors” and “Related Party Transac ons” of the 2023 Proxy Statement is incorporated herein by
reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The disclosure under the heading “Independent Registered Public Accoun ng Firm’s Fees” of the 2023 Proxy Statement is incorporated herein by
reference.
46
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1)
FINANCIAL STATEMENTS OF THE COMPANY
PART IV
The following financial statements of Hawkins, Inc. are filed as part of this Annual Report on Form 10-K:
Reports of Independent Registered Public Accoun ng Firms.
Consolidated Balance Sheets at April 2, 2023 and April 3, 2022.
Consolidated Statements of Income for the fiscal years ended April 2, 2023, April 3, 2022 and March 28, 2021.
Consolidated Statements of Comprehensive Income for the fiscal years ended April 2, 2023, April 3, 2022 and March 28, 2021.
Consolidated Statements of Shareholders’ Equity for the fiscal years ended April 2, 2023, April 3, 2022, and March 28, 2021.
Consolidated Statements of Cash Flows for the fiscal years ended April 2, 2023, April 3, 2022, and March 28, 2021.
Notes to Consolidated Financial Statements.
(a)(2)
FINANCIAL STATEMENT SCHEDULES OF THE COMPANY
The addi onal financial data listed below is included as a schedule to this Annual Report on Form 10-K and should be read in
conjunc on with the financial statements presented in Part II, Item 8. Schedules not included with this addi onal financial data have
been omi ed because they are not required, or the required informa on is included in the financial statements or the notes.
The following financial statement schedule for the fiscal years 2023, 2022 and 2021.
Schedule II — Valua on and Qualifying Accounts.
(a)(3)
EXHIBITS
47
Exhibit Index
Exhibit
Descrip on
3.1 Restated Ar cles of Incorpora on. (1)
3.2 Amended and Restated By-Laws. (2)
4.1
Descrip on of Securi es. (3)
10.1* Hawkins, Inc. 2010 Omnibus Incen ve Plan. (4)
10.2* Hawkins, Inc. Execu ve Severance Plan. (5)
10.3*
Employee Stock Purchase Plan, as amended. (6)
Method of Filing
Incorporated by Reference
Incorporated by Reference
Incorporated by Reference
Incorporated by Reference
Incorporated by Reference
Incorporated by Reference
10.4
Amendment No. 2 to the Hawkins, Inc. Employee Stock Purchase Plan, as amended.
Filed Electronically
10.5
Second Amended and Restated Credit Agreement, dated as of March 31, 2022, among the
Company, U.S. Bank Na onal Associa on, and certain financial ins tu ons. (7)
10.6*
Hawkins, Inc. 2019 Equity Incen ve Plan. (8)
10.7*
Form of Performance Stock Unit Award No ce and Restricted Stock Agreement under the
Company’s 2019 Equity Incen ve Plan. (9)
10.8*
Nine Year LTI with Shirley Rozeboom. (10)
21
Subsidiaries of the registrant.
23.1 Consent of Grant Thornton LLP.
24.1
Powers of A orney.
31.1
Cer fica on by Chief Cer fica on by Chief Execu ve Officer pursuant to Rule 13a-14(a) of
the Exchange Act. Officer pursuant to Rule 13a-14(a) of the Exchange Act.
Incorporated by Reference
Incorporated by Reference
Incorporated by Reference
Incorporated by Reference
Filed Electronically
Filed Electronically
Filed Electronically
Filed Electronically
31.2 Cer fica on by Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act.
Filed Electronically
32.1 Sec on 1350 Cer fica on by Chief Execu ve Officer.
32.2 Sec on 1350 Cer fica on by Chief Financial Officer.
101
Financial statements from the Annual Report on Form 10-K of Hawkins, Inc. for the period
ended April 2, 2023, filed with the SEC on May 17, 2023, forma ed in Inline Extensible
Business Repor ng Language (iXBRL): (i) the Consolidated Balance Sheets at April 2, 2023
and April 3, 2022 (ii) the Consolidated Statements of Income for the fiscal years ended April
2, 2023, April 3, 2022, and March 28, 2021, (iii) the Consolidated Statements of
Comprehensive Income for the fiscal years ended April 2, 2023, April 3, 2022, and March 28,
2021, (iv) the Consolidated Statements of Shareholders’ Equity for the fiscal years ended
April 2, 2023, April 3, 2022, and March 28, 2021, (v) Consolidated Statements of Cash Flows
for the fiscal years ended April 2, 2023, April 3, 2022, and March 28, 2021, and (iv) Notes to
Consolidated Financial Statements.
Filed Electronically
Filed Electronically
Filed Electronically
104
Cover Page Interac ve Data File (embedded within the inline XBRL document)
Filed Electronically
*
Management contract or compensa on plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K.
(1)
Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K dated February 26, 2021 and filed March 2, 2021.
(2)
Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated October 28, 2009 and filed November 3, 2009.
(3)
Incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K filed June 2,2021.
(4)
Incorporated by reference to Exhibit 10.1 to the Company’s Registra on Statement on Form S-8 filed June 6, 2011.
(5)
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.
(6)
Incorporated by reference to Exhibit 99.1 to the Company’s Registra on Statement on Form S-8 filed November 2, 2018.
(7)
Incorporated by reference to Exhibit 10.1 to the Company’s Registra on Statement on Form 8-K filed December 3, 2018.
(8)
Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 29, 2019.
(9)
Incorporated by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K filed May 20,2020.
(10) Incorporated by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K filed June 2,2021.
ITEM 16. FORM 10-K SUMMARY
None
SIGNATURES
Pursuant to the requirements of Sec on 13 or 15(d) of the Securi es Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated:
May 17, 2023
HAWKINS, INC.
By
/s/ Patrick H. Hawkins
Patrick H. Hawkins
Chief Execu ve Officer and President
Pursuant to the requirements of the Securi es Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant in
the capaci es and on the dates indicated.
Signature
Date
Title
/s/ Patrick H. Hawkins
Patrick H. Hawkins
/s/ Jeffrey P. Oldenkamp
Jeffrey P. Oldenkamp
*
James A. Faulconbridge
*
Mary J. Schumacher
*
Jeffrey E. Spethmann
*
Daniel J. Stauber
*
Yi "Faith" Tang
*
James T. Thompson
*
Jeffrey L. Wright
Chief Execu ve Officer, President and Director
(principal execu ve officer)
Execu ve Vice President and Chief Financial Officer
(principal financial officer and principal accoun ng officer)
Director
Director
Director
Director
Director
Director
Director
May 17, 2023
May 17, 2023
May 17, 2023
May 17, 2023
May 17, 2023
May 17, 2023
May 17, 2023
May 17, 2023
May 17, 2023
* Patrick H. Hawkins, by signing his name hereto, does hereby sign this document on behalf of each of the above-named directors of the registrant
pursuant to Powers of A orney duly executed by such persons.
By: /s/ Patrick H. Hawkins
Patrick H. Hawkins
A orney-in-fact
SCHEDULE II
HAWKINS, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED April 2, 2023, April 3, 2022 AND March 28, 2021
Descrip on
Reserve deducted from asset to which it applies:
Fiscal Year Ended April 2, 2023:
Allowance for credit losses
Fiscal Year Ended April 3, 2022:
Allowance for credit losses
Fiscal Year Ended March 28, 2021:
Allowance for credit losses
$
$
$
Balance at
Beginning
of Year
Charged to
Costs and
Expenses
Addi ons
Charged to
Other
Accounts
(In thousands)
Deduc ons
Write-Offs
Balance at
End of Year
367 $
497 $
784 $
— $
— $
— $
— $
— $
— $
(177) $
(130) $
(287) $
190
367
497
AMENDMENT NO. 2
TO THE
HAWKINS, INC.
EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
Exhibit 10.4
WHEREAS, Hawkins, Inc., a Minnesota corpora on (the “Company”) maintains the Hawkins, Inc. Employee Stock Purchase Plan, as amended (the
“Plan”); and
WHEREAS, the Company desires to amend the Plan to provide for a minimum holding period for Shares purchased under the Plan to ensure that
Par cipants’ purchases will qualify for the tax treatment described in Sec on 423(a) of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, BE IT RESOLVED, that, effec ve with respect to the purchase period commencing on July 1, 2023 and each subsequent
purchase period therea er, the Plan be, and it hereby is, amended as follows:
1.
Sec on 10.2 of the Plan is amended by replacing the second and third sentences of the second paragraph of such sec on with the following
sentence:
“At any me a er the Par cipant has sa sfied the minimum holding period requirements established by Code Sec on 423(a)(1), the Par cipant
may direct such agent to sell such Shares and distribute the net proceeds of such sale to the Par cipant, or a Par cipant may request from the
agent a cer ficate represen ng the Shares credited to the Par cipant’s account, in which case the agent shall transfer a cer ficate for such whole
number of Shares directly to the Par cipant.”
2.
The other provisions, terms and condi ons of the Plan are and will remain in full force and effect.
IN WITNESS WHEREOF, this amendment has been duly adopted by the Company’s Board of Directors as of April 26, 2023.
Subsidiaries of Hawkins, Inc.
Exhibit 21
Subsidiary
Stauber Holdings, Inc.
Stauber Performance Ingredients, Inc., a subsidiary of Stauber Holdings, Inc.
State of Organiza on
Minnesota
Minnesota
Consent of Independent Registered Public Accoun ng Firm
Exhibit 23.1
We have issued our reports dated May 17, 2023, with respect to the consolidated financial statements and internal control over financial repor ng
included in the Annual Report of Hawkins, Inc. on Form 10-K for the year ended April 2, 2023. We consent to the incorpora on by reference of said
reports in the Registra on Statements of Hawkins, Inc. on Forms S-8 (File Nos. 333-87582, 333-123080, 333-172761, 333-174735, 333-228128, and 333-
234432).
/s/ Grant Thornton LLP
Minneapolis, Minnesota
May 17, 2023
HAWKINS, INC.
Power of A orney
The undersigned director of Hawkins, Inc., a Minnesota corpora on (the “Company”), does hereby make, cons tute and appoint Patrick H. Hawkins
and Jeffrey P. Oldenkamp, and either of them, the undersigned’s true and lawful a orneys-in-fact and agents, with power of subs tu on and
resubs tu on, for the undersigned and in the undersigned’s name, place and stead, to sign and affix the undersigned’s name as such director of the
Company to an Annual Report on Form 10-K for the fiscal year ended April 2, 2023 or other applicable form, and any amendments thereto, to be filed by
the Company with the U.S. Securi es and Exchange Commission, Washington, D.C. (the “SEC”), and to file the same with all exhibits thereto and other
suppor ng documents in connec on therewith with the SEC, gran ng unto said a orneys-in-fact and agents, and each of them, full power and authority
to do and to perform any and all acts necessary or incidental to the performance and execu on of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this Power of A orney as of the date set forth below.
/s/ James A. Faulconbridge
James A. Faulconbridge
April 27, 2022
HAWKINS, INC.
Power of A orney
The undersigned director of Hawkins, Inc., a Minnesota corpora on (the “Company”), does hereby make, cons tute and appoint Patrick H. Hawkins
and Jeffrey P. Oldenkamp, and either of them, the undersigned’s true and lawful a orneys-in-fact and agents, with power of subs tu on and
resubs tu on, for the undersigned and in the undersigned’s name, place and stead, to sign and affix the undersigned’s name as such director of the
Company to an Annual Report on Form 10-K for the fiscal year ended April 2, 2023 or other applicable form, and any amendments thereto, to be filed by
the Company with the U.S. Securi es and Exchange Commission, Washington, D.C. (the “SEC”), and to file the same with all exhibits thereto and other
suppor ng documents in connec on therewith with the SEC, gran ng unto said a orneys-in-fact and agents, and each of them, full power and authority
to do and to perform any and all acts necessary or incidental to the performance and execu on of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this Power of A orney as of the date set forth below.
/s/ Mary J. Schumacher
Mary J. Schumacher
April 27, 2022
HAWKINS, INC.
Power of A orney
The undersigned director of Hawkins, Inc., a Minnesota corpora on (the “Company”), does hereby make, cons tute and appoint Patrick H. Hawkins
and Jeffrey P. Oldenkamp, and either of them, the undersigned’s true and lawful a orneys-in-fact and agents, with power of subs tu on and
resubs tu on, for the undersigned and in the undersigned’s name, place and stead, to sign and affix the undersigned’s name as such director of the
Company to an Annual Report on Form 10-K for the fiscal year ended April 2, 2023 or other applicable form, and any amendments thereto, to be filed by
the Company with the U.S. Securi es and Exchange Commission, Washington, D.C. (the “SEC”), and to file the same with all exhibits thereto and other
suppor ng documents in connec on therewith with the SEC, gran ng unto said a orneys-in-fact and agents, and each of them, full power and authority
to do and to perform any and all acts necessary or incidental to the performance and execu on of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this Power of A orney as of the date set forth below.
/s/ Jeffrey E. Spethmann
Jeffrey E. Spethmann
April 27, 2022
HAWKINS, INC.
Power of A orney
The undersigned director of Hawkins, Inc., a Minnesota corpora on (the “Company”), does hereby make, cons tute and appoint Patrick H. Hawkins
and Jeffrey P. Oldenkamp, and either of them, the undersigned’s true and lawful a orneys-in-fact and agents, with power of subs tu on and
resubs tu on, for the undersigned and in the undersigned’s name, place and stead, to sign and affix the undersigned’s name as such director of the
Company to an Annual Report on Form 10-K for the fiscal year ended April 2, 2023 or other applicable form, and any amendments thereto, to be filed by
the Company with the U.S. Securi es and Exchange Commission, Washington, D.C. (the “SEC”), and to file the same with all exhibits thereto and other
suppor ng documents in connec on therewith with the SEC, gran ng unto said a orneys-in-fact and agents, and each of them, full power and authority
to do and to perform any and all acts necessary or incidental to the performance and execu on of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this Power of A orney as of the date set forth below.
/s/ Daniel J. Stauber
Daniel J. Stauber
April 27, 2022
HAWKINS, INC.
Power of A orney
The undersigned director of Hawkins, Inc., a Minnesota corpora on (the “Company”), does hereby make, cons tute and appoint Patrick H. Hawkins
and Jeffrey P. Oldenkamp, and either of them, the undersigned’s true and lawful a orneys-in-fact and agents, with power of subs tu on and
resubs tu on, for the undersigned and in the undersigned’s name, place and stead, to sign and affix the undersigned’s name as such director of the
Company to an Annual Report on Form 10-K for the fiscal year ended April 2, 2023 or other applicable form, and any amendments thereto, to be filed by
the Company with the U.S. Securi es and Exchange Commission, Washington, D.C. (the “SEC”), and to file the same with all exhibits thereto and other
suppor ng documents in connec on therewith with the SEC, gran ng unto said a orneys-in-fact and agents, and each of them, full power and authority
to do and to perform any and all acts necessary or incidental to the performance and execu on of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this Power of A orney as of the date set forth below.
/s/ Yi “Faith” Tang
Yi “Faith” Tang
April 27, 2022
HAWKINS, INC.
Power of A orney
The undersigned director of Hawkins, Inc., a Minnesota corpora on (the “Company”), does hereby make, cons tute and appoint Patrick H. Hawkins
and Jeffrey P. Oldenkamp, and either of them, the undersigned’s true and lawful a orneys-in-fact and agents, with power of subs tu on and
resubs tu on, for the undersigned and in the undersigned’s name, place and stead, to sign and affix the undersigned’s name as such director of the
Company to an Annual Report on Form 10-K for the fiscal year ended April 2, 2023 or other applicable form, and any amendments thereto, to be filed by
the Company with the U.S. Securi es and Exchange Commission, Washington, D.C. (the “SEC”), and to file the same with all exhibits thereto and other
suppor ng documents in connec on therewith with the SEC, gran ng unto said a orneys-in-fact and agents, and each of them, full power and authority
to do and to perform any and all acts necessary or incidental to the performance and execu on of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this Power of A orney as of the date set forth below.
/s/ James T. Thompson
James Thompson
April 27, 2022
HAWKINS, INC.
Power of A orney
The undersigned director of Hawkins, Inc., a Minnesota corpora on (the “Company”), does hereby make, cons tute and appoint Patrick H. Hawkins
and Jeffrey P. Oldenkamp, and either of them, the undersigned’s true and lawful a orneys-in-fact and agents, with power of subs tu on and
resubs tu on, for the undersigned and in the undersigned’s name, place and stead, to sign and affix the undersigned’s name as such director of the
Company to an Annual Report on Form 10-K for the fiscal year ended April 2, 2023 or other applicable form, and any amendments thereto, to be filed by
the Company with the U.S. Securi es and Exchange Commission, Washington, D.C. (the “SEC”), and to file the same with all exhibits thereto and other
suppor ng documents in connec on therewith with the SEC, gran ng unto said a orneys-in-fact and agents, and each of them, full power and authority
to do and to perform any and all acts necessary or incidental to the performance and execu on of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this Power of A orney as of the date set forth below.
/s/ Jeffrey L. Wright
Jeffrey L. Wright
April 27, 2022
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
CERTIFICATIONS
I, Patrick H. Hawkins, cer fy 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
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial statements, and other financial informa on included in this report, fairly present in all material respects
the financial condi on, results of opera ons and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other cer fying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial repor ng (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 informa on rela ng to the registrant, including its consolidated subsidiaries, is made known to us
by others within those en es, par cularly during the period in which this report is being prepared;
b) designed such internal control over financial repor ng, or caused such internal control over financial repor ng to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial repor ng and the prepara on of financial statements
for external purposes in accordance with generally accepted accoun ng principles;
c)
evaluated the effec veness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effec veness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evalua on;
and
d) disclosed in this report any change in the registrant’s internal control over financial repor ng that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial repor ng; and
5.
The registrant’s other cer fying officer and I have disclosed, based on our most recent evalua on of internal control over financial repor ng, to
the registrant’s auditors and the audit commi ee of the registrant’s board of directors (or persons performing the equivalent func ons):
a)
b)
all significant deficiencies and material weaknesses in the design or opera on of internal control over financial repor ng which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial informa on; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial repor ng.
Date: May 17, 2023
/s/ Patrick H. Hawkins
Patrick H. Hawkins
Chief Execu ve Officer and President
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
CERTIFICATIONS
I, Jeffrey P. Oldenkamp, cer fy 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
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial statements, and other financial informa on included in this report, fairly present in all material respects
the financial condi on, results of opera ons and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other cer fying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial repor ng (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 informa on rela ng to the registrant, including its consolidated subsidiaries, is made known to us
by others within those en es, par cularly during the period in which this report is being prepared;
b) designed such internal control over financial repor ng, or caused such internal control over financial repor ng to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial repor ng and the prepara on of financial statements
for external purposes in accordance with generally accepted accoun ng principles;
c)
evaluated the effec veness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effec veness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evalua on;
and
d) disclosed in this report any change in the registrant’s internal control over financial repor ng that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial repor ng; and
5.
The registrant’s other cer fying officer and I have disclosed, based on our most recent evalua on of internal control over financial repor ng, to
the registrant’s auditors and the audit commi ee of the registrant’s board of directors (or persons performing the equivalent func ons):
a)
b)
all significant deficiencies and material weaknesses in the design or opera on of internal control over financial repor ng which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial informa on; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial repor ng.
Date: May 17, 2023
/s/ Jeffrey P. Oldenkamp
Jeffrey P. Oldenkamp
Execu ve Vice President and Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connec on with the Annual Report of Hawkins, Inc. (the Company) on Form 10-K for the period ended April 2, 2023, as filed with the Securi es and
Exchange Commission on the date hereof (the Report), I, Patrick H. Hawkins, Chief Execu ve Officer and President of the Company, cer fy, 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 sec on 13(a) or 15(d) of the Securi es Exchange Act of 1934;
and
(2) The informa on contained in the Report fairly presents, in all material respects, the financial condi on and results of opera ons of the
Company.
/s/ Patrick H. Hawkins
Patrick H. Hawkins
Chief Execu ve Officer and President
May 17, 2023
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connec on with the Annual Report of Hawkins, Inc. (the Company) on Form 10-K for the period ended April 2, 2023, as filed with the Securi es and
Exchange Commission on the date hereof (the Report), I, Jeffrey P. Oldenkamp, Chief Financial Officer of the Company, cer fy, 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 sec on 13(a) or 15(d) of the Securi es Exchange Act of 1934;
and
(2) The informa on contained in the Report fairly presents, in all material respects, the financial condi on and results of opera ons of the
Company.
/s/ Jeffrey P. Oldenkamp
Jeffrey P. Oldenkamp
Execu ve Vice President and Chief Financial Officer
May 17, 2023