What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-06-02 compared with 2020-05-20 · 260 added, 277 removed, 537 unchanged (50% of the section changed)

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Hawkins, Inc.:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Hawkins, Inc.

and subsidiaries (the Company) as of March 29, 2020 and March 31, 2019, the related consolidated statements of income (loss), comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three-year period ended March 29, 2020, and the related notes and financial statement schedule II (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of March 29, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 29, 2020 and March 31, 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended March 29, 2020, in conformity with U.S.

generally accepted accounting principles.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 29, 2020 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of April 1, 2019 due to the adoption of Accounting Standards Update 2016-02, Leases (Topic 842) , and related amendments.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

Board of Directors and Shareholders

Hawkins, Inc.

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of Hawkins, Inc.

(a Minnesota corporation) and subsidiaries (the “Company”) as of March 28, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 28, 2021, 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 Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended March 28, 2021, and our report dated June 2, 2021 expressed an unqualified opinion on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting (“Management’s Report”).

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

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 effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness 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.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of C&L Aqua Professionals, Inc and LC Blending, Inc., two wholly-owned subsidiaries, whose financial statements reflect total assets and revenues constituting 3.5 and less than 1 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended March 28, 2021.

As indicated in Management’s Report, C&L Aqua Professionals, Inc and LC Blending, Inc.

were acquired during 2021.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting C&L Aqua Professionals, Inc and LC Blending, Inc.

Definition and limitations of internal control over financial reporting

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ GRANT THORNTON LLP

Minneapolis, Minnesota

Board of Directors and Shareholders

Hawkins, Inc.

Opinion on the financial statement s

We have audited the accompanying consolidated balance sheet of Hawkins, Inc.

(a Minnesota corporation) and subsidiaries (the “Company”) as of March 28, 2021, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for year then ended, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 28, 2021, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of March 28, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated June 2, 2021 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 accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the 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 evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2021.

Minneapolis, Minnesota

Board of Directors and Shareholders

Hawkins, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Hawkins, Inc.

and subsidiaries (the Company) as of March 29, 2020, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the two‑year period ended March 29, 2020, and the related notes and financial statement schedule II (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 29, 2020, and the results of its operations and its cash flows for each of the years in the two‑year period ended March 29, 2020, in conformity with U.S.

generally accepted accounting principles.

Change in Accounting Principle

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated 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 consolidated 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 consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

We served as the Company’s auditor from 2009 to 2020.

Minneapolis, Minnesota

May 20, 2020, except as to the stock split and par value adjustments as described in Note 1, which are as of June 2, 2021

HAWKINS, INC.

CONSOLIDATED BALANCE SHEETS

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Cash and cash equivalents $ 2,998 $ 4,277

Trade receivables less allowance for doubtful accounts of $784 for 2020 and $620 for 2019 67,391 63,966

Trade accounts receivables, net 90,603 67,391

Inventories 63,864 54,436

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Current portion of long-term debt 9,907 9,907

Income tax payable 59 —

Short-term lease liability 1,587 1,523

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PENSION WITHDRAWAL LIABILITY 4,631 4,978

OTHER LONG-TERM LIABILITIES 6,140 5,695

DEFERRED INCOME TAXES 24,445 25,106

DEFERRED COMPENSATION LIABILITY 7,322 5,026

OTHER LONG-TERM LIABILITIES 1,368 1,114

Total liabilities 207,304 155,844

COMMITMENTS AND CONTINGENCIES — —

COMMITMENTS AND CONTINGENCIES (Note 13)

SHAREHOLDERS’ EQUITY:

Common stock;

Common shares;

60,000,000 shares of $ 0.01 par value;

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Retained earnings 213,898 182,947

Accumulated other comprehensive income ( 79 ) 317

Accumulated other comprehensive income (loss) — ( 79 )

Total shareholders’ equity 265,246 233,484

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HAWKINS, INC.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per-share data)

Fiscal Year Ended

March 29, 2020 March 31, 2019 April 01, 2018

March 28, 2021 March 29, 2020 March 31, 2019

Sales $ 596,871 $ 540,198 $ 556,326

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Selling, general and administrative expenses ( 67,884 ) ( 59,246 ) ( 59,118 )

Goodwill impairment — — ( 39,116 )

Operating income (loss) 41,671 36,818 ( 11,759 )

Operating income 55,878 41,671 36,818

Interest expense, net ( 1,467 ) ( 2,511 ) ( 3,361 )

Other (expense) income ( 204 ) 73 91

Income (loss) before income taxes 38,956 33,530 ( 15,076 )

Income tax (expense) benefit ( 10,589 ) ( 9,097 ) 5,899

Net income (loss) $ 28,367 $ 24,433 $ ( 9,177 )

Other income (expense) 1,440 ( 204 ) 73

Income before income taxes 55,851 38,956 33,530

Income tax expense ( 14,871 ) ( 10,589 ) ( 9,097 )

Net income $ 40,980 $ 28,367 $ 24,433

Weighted average number of shares outstanding-basic 21,024,344 21,159,978 21,309,774

Weighted average number of shares outstanding-diluted 21,260,296 21,308,800 21,452,352

Basic earnings (loss) per share $ 2.68 $ 2.29 $ ( 0.87 )

Diluted earnings (loss) per share $ 2.66 $ 2.28 $ ( 0.86 )

Basic earnings per share $ 1.95 $ 1.34 $ 1.15

Diluted earnings per share $ 1.93 $ 1.33 $ 1.14

Cash dividends declared per common share $ 0.47125 $ 0.46125 $ 0.34000

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HAWKINS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

Fiscal Year Ended

March 29, 2020 March 31, 2019 April 1, 2018

Net income (loss) $ 28,367 $ 24,433 $ ( 9,177 )

March 28, 2021 March 29, 2020 March 31, 2019

Net income $ 40,980 $ 28,367 $ 24,433

Other comprehensive income, net of tax:

Unrealized (loss) gain on interest rate swap ( 396 ) ( 280 ) 296

Unrealized gain (loss) on interest rate swap 79 ( 396 ) ( 280 )

Unrealized gain on post-retirement liability — — 1

Total other comprehensive (loss) income ( 396 ) ( 279 ) 298

Total comprehensive income (loss) $ 27,971 $ 24,154 $ ( 8,879 )

Total other comprehensive income (loss) 79 ( 396 ) ( 279 )

Total comprehensive income $ 41,059 $ 27,971 $ 24,154

See accompanying notes to consolidated financial statements.

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(In thousands, except share data)

Common Stock Additional

Common Shares Additional

Capital Retained

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Vesting of restricted stock 66,102 — — — — —

Shares surrendered for payroll taxes ( 16,210 ) — ( 266 ) — — ( 266 )

ESPP shares issued 87,356 1 1,337 — — 1,338

Other comprehensive income, net of tax ( 78 ) 298 220

Net loss ( 9,177 ) ( 9,177 )

BALANCE — April 1, 2018 10,631,992 $ 532 $ 53,877 $ 147,242 $ 596 $ 202,247

Cash dividends declared ( 7,270 ) ( 7,270 )

Shares repurchased ( 216,332 ) ( 2 ) ( 4,350 ) — — ( 4,352 )

Other comprehensive loss, net of tax — — — — ( 279 ) ( 279 )

Net Income — — — 24,433 — 24,433

BALANCE — March 31, 2019 21,184,900 $ 212 $ 52,927 $ 164,405 $ 317 $ 217,861

Cash dividends declared and paid — — — ( 9,825 ) — ( 9,825 )

Share-based compensation expense — — 2,273 — — 2,273

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Shares repurchased ( 291,166 ) ( 2 ) ( 5,851 ) — — ( 5,853 )

Other comprehensive income, net of tax ( 279 ) ( 279 )

Other comprehensive loss, net of tax — — — — ( 396 ) ( 396 )

Net income — — — 28,367 — 28,367

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Fiscal Year Ended

March 29, 2020 March 31, 2019 April 1, 2018

March 28, 2021 March 29, 2020 March 31, 2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) $ 28,367 $ 24,433 $ ( 9,177 )

Reconciliation to cash flows:

Net income $ 40,980 $ 28,367 $ 24,433

Reconciliation to cash flows provided by operating activities:

Depreciation and amortization 22,669 21,584 21,756

Operating leases 1,896 2,033 —

Amortization of debt issuance costs 93 122 136

Loss (gain) on deferred compensation assets 233 ( 73 ) ( 92 )

Goodwill Impairment — — 39,116

(Gain) loss on deferred compensation assets ( 1,440 ) 233 ( 73 )

Deferred income taxes ( 689 ) ( 1,421 ) ( 607 )

Stock compensation expense 3,343 2,273 2,010

Loss (gain) from property disposals 563 415 ( 46 )

Changes in operating accounts (using) providing cash:

Other 203 656 537

Changes in operating accounts (using) providing cash, net of acquisitions:

Trade receivables ( 21,323 ) ( 3,387 ) ( 487 )

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Additions to property, plant, and equipment ( 20,794 ) ( 24,549 ) ( 12,618 )

Proceeds from property disposals 346 275 364

Acquisitions ( 51,000 ) — —

Other 362 346 275

Net cash used in investing activities ( 71,432 ) ( 24,203 ) ( 12,343 )

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Proceeds from revolver borrowings 76,000 19,000 93,000

Net cash used in financing activities ( 39,621 ) ( 31,438 ) ( 9,881 )

Net cash provided by (used in) financing activities 26,360 ( 39,621 ) ( 31,438 )

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 1,279 ) ( 4,922 ) 4,209

( 4,922 ) 4,209 ( 1,871 )

CASH AND CASH EQUIVALENTS - beginning of year 4,277 9,199 4,990

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Fiscal Year - Our fiscal year is a 52 or 53-week year ending on the Sunday closest to March 31.

Our fiscal years ended March 29, 2020 (“fiscal 2020”), March 31, 2019 (“fiscal 2019”) and April 1, 2018 (“fiscal 2018”) were 52 weeks.

The fiscal year ending March 28, 2021 (“fiscal 2021”) will also be 52 weeks.

Our fiscal years ended March 28, 2021 (“fiscal 2021”), March 29, 2020 (“fiscal 2020”) and March 31, 2019 (“fiscal 2019”) were 52 weeks.

The fiscal year ending April 3, 2022 (“fiscal 2022”) will be 53 weeks.

Principles of Consolidation - The consolidated financial statements include the accounts of Hawkins, Inc.

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We sell our principal products to a large number of customers in many different industries.

There are no concentrations of credit risk with a single customer from a particular service or geographic area that would significantly impact us in the near term.

As of March 28, 2021, we had a significant concentration of credit risk, with a single customer representing approximately 20% of our total trade receivables.

There are no other concentrations of credit risk with other single customers from a particular service or geographic area that would significantly impact us in the near term.

To reduce credit risk, we routinely assess the financial strength of our customers.

We record an allowance for doubtful accounts to reduce our receivables to an amount we estimate is collectible from our customers.

Estimates used in determining the allowance for doubtful accounts are based on historical collection experience, current trends, aging of accounts receivable and periodic evaluations of our customers’ financial condition.

Receivables are reported net of an allowance for credit losses as determined by management at the end of each reporting period.

Our receivable allowance in based on an estimate of expected credit losses, with the estimate based on a number of qualitative and quantitative factors that, based on collection experience, may have an impact on repayment risk and ability to collect.

Inventories - Inventories, consisting primarily of finished goods, are primarily valued at the lower of cost or net realizable value, with cost for approximately 68 % of our inventory determined using the last-in, first-out (“LIFO”) method.

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As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date, in determining the present value of lease payments.

We use the implicit rate when readily determinable.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

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and 3 to 10 years for transportation equipment and office furniture and equipment including computer systems.

Leasehold improvements are depreciated over the lesser of their estimated useful lives or the remaining lease term.

Depreciation expense is recorded in our Consolidated Statement of Income (Loss) within cost of goods sold and selling, general and administrative expense, depending on the use of the underlying asset.

Leasehold improvements are amortized over the lesser of their estimated useful lives or the remaining lease term.

Depreciation and amortization expense is recorded in our Consolidated Statement of Income within cost of goods sold and selling, general and administrative expense, depending on the use of the underlying asset.

We recorded depreciation expense of $ 16.8 million for fiscal 2021, $ 16.5 million for fiscal 2020 and $ 16.3 million for fiscal 2019,

Significant improvements that add to productive capacity or extend the lives of properties are capitalized.

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When property is retired or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts and any related gains or losses are included in income.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 reductions 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 operations.

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 estimate future cash flows and the fair value of long-lived assets.

During fiscal 2020, we incurred a $ 0.6 million impairment charge as a result of the determination to not use a piece of equipment in our manufacturing operations as previously planned.

Other that this asset, no additional long-lived assets were determined to be impaired during fiscal years 2020, 2019 or 2018.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We incurred asset write-off charges of $ 0.2 million during fiscal 2021 and $ 0.6 million during fiscal 2020.

Goodwill and Identifiable Intangible Assets - Goodwill represents the excess of the cost of acquired businesses over the fair value of identifiable tangible net assets and identifiable intangible assets purchased.

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Our annual test for impairment is as of the first day of our fourth fiscal quarter.

As of December 30, 2019, we performed an analysis of qualitative factors for our Industrial and Water Treatment reporting units to determine whether it is more likely than not that the fair value of either of these reporting units was less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test.

Based on management’s analysis of qualitative factors, we determined that it was not necessary to perform a quantitative goodwill impairment test for either of these reporting units.

We performed a quantitative goodwill impairment test for our Health and Nutrition reporting unit.

This test, used to identify potential impairment, compares the fair value of each reporting unit with its carrying value, including indefinite-lived intangible assets.

If the fair value exceeds the carrying value, the goodwill is not considered impaired.

If the carrying amount exceeds the fair value, the reporting unit’s goodwill is considered impaired, and we must recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit’s fair value.

The fair value of our Health and Nutrition reporting unit exceeded its carrying value as of December 30, 2019, and accordingly we did not record a goodwill impairment charge.

Goodwill impairment assessments were also completed in the fourth quarters of fiscal 2019 and 2018.

We recorded a $ 39.1 million impairment charge during the fourth quarter of fiscal 2018 in our Health and Nutrition reporting unit.

The impairment charge was recorded as a result of changes in expectations for future growth as part of our fourth quarter long-term strategic planning process to align with historical experience in recent periods and expected changes in future product mix.

As of December 28, 2020, we performed an analysis of qualitative factors for our Industrial, Water Treatment and Health and Nutrition reporting units to determine whether it is more likely than not that the fair value of either of these reporting units was less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test.

Based on management’s analysis of qualitative factors, we determined that it was not necessary to perform a quantitative goodwill impairment test for any of these reporting units.

Goodwill impairment assessments were also completed in the fourth quarters of fiscal 2020 and 2019 and similarly, we did not record a goodwill impairment charge.

Our primary identifiable intangible assets include customer lists, trade secrets, non-competition agreements, trademarks and trade names acquired in previous business acquisitions.

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Identifiable intangible assets that are subject to amortization 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 2021, 2020 or 2019.

Identifiable intangible assets not subject to amortization are tested for impairment annually or more frequently if events warrant.

The impairment test consists of a qualitative assessment to determine whether it is more likely than not that the asset is impaired.

Based on management’s analysis of qualitative factors, we determined that it was not necessary to perform a quantitative impairment test for fiscal 2020 .

Based on management’s analysis of qualitative factors, we determined that it was not necessary to perform an annual quantitative impairment test for fiscal 2021.

Impairment assessments were also completed in the fourth quarters of fiscal 2020 and 2019 which resulted in no impairment charges for either of these fiscal years.

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The estimated grant date fair value of each stock-based award is recognized in expense over the requisite service period (generally the vesting period).

Non-vested share awards are recorded as expense over the requisite service periods based on the market value on the date of grant.

Earnings Per Share - Basic earnings per share (“EPS”) are computed by dividing net income by the weighted-average number of common shares outstanding.

Diluted EPS are computed by dividing net income by the weighted-average number of common shares outstanding including the incremental shares assumed to be issued as performance units and restricted stock.

Non-vested share awards are recorded as expense over the requisite service periods based on the stock price on the date of grant.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Earnings Per Share - Basic earnings per share (“EPS”) are computed by dividing net income by the weighted-average number of common shares outstanding.

Basic and diluted EPS were calculated using the following:

March 29, 2020 March 31, 2019 April 1, 2018

March 28, 2021 March 29, 2020 March 31, 2019

Weighted average common shares outstanding — basic 21,024,344 21,159,978 21,309,774

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There were no shares or stock options excluded from the calculation of weighted average common shares for diluted EPS for fiscal 2021, 2020 or 2019.

Stock Split - On March 1, 2021, we effected a two-for-one stock split of our common stock and adjusted the par value of our common stock to $.01 par value.

Our consolidated financial statements, related notes, and other financial data contained in this report have been adjusted to give retroactive effect to the stock split for all periods presented.

Derivative Instruments and Hedging Activities - We are subject to interest rate risk associated with our variable rate debt.

We have in place an interest rate swap which was has been designated as a cash flow hedge, the purpose of which is to eliminate the cash flow impact of interest rate changes on a portion of our variable-rate debt.

The hedge was measured at fair value on the contract date and is subsequently remeasured to fair value at each reporting date.

We had an interest rate swap agreement which was designated as a cash flow hedge, the purpose of which was to eliminate the cash flow impact of interest rate changes on a portion of our variable-rate debt.

The interest rate swap agreement terminated on December 23, 2020.

The hedge was measured at fair value on the contract date and was subsequently remeasured to fair value at each reporting date.

Changes in the fair value of a derivative that is highly effective, and that is designated and qualifies as a cash flow hedge, are recorded in other comprehensive income, until the consolidated statement of income is affected by the variability in cash flows of the designated hedged item.

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Recently Issued Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments .

The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses on instruments within its scope, including trade receivables.

This update is intended to provide financial statement users with more decision-useful information about the expected credit losses.

This ASU is effective for annual periods and interim periods for those annual periods beginning after December 15, 2019, which for us is our fiscal year 2021.

We have evaluated the requirements of this standard on our financial assets.

Upon adoption, this ASU will impact our method for calculating and estimating our allowance for doubtful accounts, but it will not have a material impact to our financial position or results of operations.

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes , removing certain exceptions for investments, intra-period allocations and interim calculations and adding guidance to reduce complexity in accounting for income taxes.

The accounting standard will be effective for reporting periods beginning after December 15, 2020.

Early adoption of this guidance is permitted.

The accounting standard is effective for reporting periods beginning after December 15, 2020 and is not expected to have a material impact on the Company's consolidated financial position, results of operations and cash flows.

We do not expect that any other recently issued accounting pronouncements will have a material effect on our financial statements.

Recently Adopted Accounting Pronouncements

In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) , which provides new accounting guidance requiring lessees to recognize most leases as assets and liabilities on the balance sheet and disclose key information about leasing arrangements.

We adopted this guidance and related amendments on April 1, 2019.

The new standard establishes a Right of Use ("ROU") model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months.

Leases will be classified as finance or operating, with classification affecting the pattern and expense recognition in the income statement.

We adopted this ASU using the modified retrospective method.

See Note 14 to the condensed consolidated financial statements for further details.

In May 2014, the FASB issued ASU 2014-09, which provides accounting requirements for recognition of revenue from contracts with customers.

We adopted the new standard effective April 2, 2018, and there was no impact to our financial position or results of operations.

See Note 2 for disclosures required upon adoption of this new standard.

In January 2016, the FASB issued ASU 2016-01 which provides guidance that addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.

We adopted the new standard effective April 2, 2018, and there was no impact to our financial position or results of operations.

In February 2018, the FASB issued ASU 2018-02 which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (the “Tax Act”).

Hawkins early adopted this standard during the fourth quarter of fiscal 2018 and reclassified approximately $ 0.1 million from other comprehensive income to retained earnings.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments .

The amendments in this update replaced the incurred loss impairment methodology in previous GAAP with a methodology that reflects expected credit losses on instruments within its scope, including trade receivables.

This update is intended to provide financial statement users with more decision-useful information about the expected credit losses.

We adopted this guidance on March 30, 2020.

Our adoption of this ASU impacted our method for calculating and estimating our allowance for doubtful accounts but did not have a material impact to our financial position or results of operations.

Note 2 — Acquisitions

Acquisition of American Development Corporation of Tennessee, Inc.

On July 28, 2020, we acquired substantially all the assets of American Development Corporation of Tennessee, Inc.

(“ADC”) under the terms of an asset purchase agreement among us, ADC and its shareholders.

We paid $ 25 million for the acquisition, using funds available under our revolving credit facility with U.S.

Bank National Association to fund the acquisition.

ADC was a water treatment chemical distribution company operating primarily in Tennessee, Georgia and Kentucky.

The results of operations since the acquisition date, and the assets, including the goodwill associated with this acquisition, are included in our Water Treatment segment.

Costs associated with this transaction were not material and were expensed as incurred.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In December 2017, the Securities and Exchange Commission (“SEC”) staff issued Staff Accounting Bulletin No.

118 (“SAB 118”) to address the application of U.S.

GAAP related to the enactment of the Tax Act.

This guidance was adopted in the third quarter of fiscal 2018.

Additional information regarding our adoption of this guidance is contained in Note 12.

In March 2016, the FASB issued ASU 2016-09, which provides accounting guidance intended to improve the accounting for share-based payment transactions.

This guidance outlines new provisions intended to simplify various aspects related to accounting for share-based payments and their presentation in the financial statements.

We adopted this guidance in the first quarter of fiscal 2018.

We will continue to estimate forfeitures as we determine compensation cost each period.

The primary impact on our consolidated financial statements is the recognition of excess tax benefits in the provision for income taxes rather than additional paid-in capital, which may result in increased volatility in the reported amounts of income tax expense and net income.

In July 2015, the FASB issued ASU 2015-11, which requires companies to change the measurement principal for inventory measured using the first-in, first-out (“FIFO”) or average cost method from the lower of cost or market to the lower of cost and net realizable value.

Treatment of inventory valued under the last-in, last-out (“LIFO”) method is unchanged by this guidance.

We adopted this guidance in the first quarter of fiscal 2018 and there was no impact to our financial position or results of operations.

The acquisition has been accounted for as a business combination, under which the total purchase price is allocated to the net tangible and intangible assets and liabilities of ADC acquired in connection with the acquisition based on their estimated fair values.

We estimated the fair values of the assets acquired and liabilities assumed using a discounted cash flow analysis (income approach).

Of the $ 25 million purchase price, we allocated $ 13.3 million to finite-lived intangible assets, primarily customer relationships to be amortized over 17 years, $ 1.6 million to property, plant and equipment, and $ 0.9 million to net working capital.

The residual amount of $ 9.2 million was allocated to goodwill.

The goodwill recognized as a result of this acquisition is primarily attributable to strategic and synergistic benefits, as well as the assembled workforce.

Such goodwill is expected to be deductible for tax purposes.

The purchase price allocation is final.

Acquisition of Property :

On December 16, 2020, 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 adds approximately 40,000 square feet of manufacturing and warehouse space to bring us to a total of 105,000 square feet of space 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 better serve our customers.

This acquisition has been accounted for as an asset acquisition, under which the total purchase price is allocated to the net tangible assets acquired based on their estimated fair values.

Of the $ 10 million purchase price, $ 4.6 million was allocated to buildings, $ 3.7 million was allocated to land, $ 1.4 million was allocated to equipment, and $ 0.3 million was allocated to site improvements.

Acquisition of C&L Aqua Professionals, Inc.

and LC Blending, Inc.

On December 30, 2020, we acquired substantially 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.

We paid $ 16 million for the acquisition, using funds available under our revolving credit facility with U.S.

Bank National Association to fund the acquisition.

C&L Aqua was a water treatment chemical distribution company operating primarily in Louisiana.

The results of operations since the acquisition date, and the assets, including the goodwill associated with this acquisition, are included in our Water Treatment segment.

Costs associated with this transaction were not material and were expensed as incurred.

The acquisition has been accounted for as a business combination, under which the total purchase price is allocated to the net tangible and intangible assets and liabilities of C&L Aqua acquired in connection with the acquisition based on their estimated fair values.

We estimated the fair values of the assets acquired and liabilities assumed using a discounted cash flow analysis (income approach).

Of the $ 16 million purchase price, we preliminarily allocated $ 8.2 million to finite-lived intangible assets, primarily customer relationships to be amortized over 18 years, $ 3.6 million to property, plant and equipment, and $ 1.1 million to net working capital.

The residual amount of $ 3.1 million was allocated to goodwill.

The goodwill recognized as a result of this acquisition is primarily attributable to strategic and synergistic benefits, as well as the assembled workforce.

Such goodwill is expected to be deductible for tax purposes.

The purchase price allocation is preliminary pending finalization of a construction project at the acquired property.

Note 3 — Revenue

On April 2, 2018, we adopted ASU 2014-09 using the modified retrospective method applied to those contracts which were not completed as of April 2, 2018.

Results for reporting periods beginning after April 2, 2018 are presented under ASU 2014-09, while prior period amounts are not adjusted and continue to be reported in accordance with historic accounting under Accounting Standards Codification (“ASC”) Topic 605.

Our revenue arrangements generally consist of a single performance obligation to transfer promised goods or services.

As a result, the application of ASU 2014-09 had no impact on our financial statement line items as compared with the guidance that was in effect before the change.

Accordingly, the impact of adopting the standard resulted in no adjustment to accumulated retained earnings.

We disaggregate revenues from contracts with customers by both operating segments and types of product sold.

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Types of products sold within each operating segment help us to further evaluate the financial performance of our segments.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table disaggregates external customer net sales by major revenue stream:

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Total external customer sales $ 275,224 $ 159,895 $ 105,079 $ 540,198

Fiscal Year Ended March 31, 2019:

(In thousands) Industrial Water

Treatment Health and

Nutrition Total

Bulk / Distributed specialty products (1)

$ 60,947 $ 21,813 $ 109,067 $ 191,827

Manufactured, blended or repackaged products (2)

216,874 126,217 15,684 358,775

Other 4,039 1,460 225 5,724

Total external customer sales $ 281,860 $ 149,490 $ 124,976 $ 556,326

(1) For our Industrial and Water Treatment segments, this line includes our bulk products that we do not modify in any way, but receive, store, and ship from our facilities, or direct ship to our customers in large quantities.

For our Health and Nutrition segment,

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

this line includes our non-manufactured distributed specialty products, which may be sold out of one of our facilities or direct shipped to our customers.

For our Health and Nutrition segment, this line includes our non-manufactured distributed specialty products, which may be sold out of one of our facilities or direct shipped to our customers.

(2) For our Industrial and Water Treatment segments, this line includes our non-bulk specialty products that we either manufacture, blend, repackage, resell in their original form, or direct ship to our customers in smaller quantities, and services we provide for our customers.

For our Health and Nutrition segment, this line includes products manufactured, processed or repackaged in our facility and/or with our equipment .

Net sales include products and shipping charges, net of estimates for product returns and any related sales rebates.

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products.

All revenue is recognized when we satisfy our performance obligations under the contract.

Our criteria for recording revenue is consistent between our operating segments and types of products sold.

We recognize revenue upon transfer of control of the promised products to the customer, with revenue recognized at the point in time the customer obtains control of the products.

In arrangements where product is shipped directly from the vendor to our customer, we act as the principal in the transaction as we direct the other party to provide the product to our customer on our behalf, take inventory risk, establish the selling price, and are exposed to credit risk for the collection of the invoiced amount.

If there were circumstances where we were to manufacture products for customers that were unique to their specifications and we would be prohibited by contract to use the product for any alternate use, we would recognize revenue over time if all criteria were met.

We have made a policy election to treat shipping costs for FOB shipping point sales as fulfillment costs.

As such, we recognize revenue for all shipping charges, if applicable, at the same time we recognize revenue on the products delivered.

We estimate product returns based on historical return rates.

Using probability assessments, we estimate sales rebates expected to be paid over the term of the contract.

The majority of our contracts have a single performance obligation and are short term in nature.

Sales taxes that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales.

We offer certain customers cash discounts and volume rebates as sales incentives.

The discounts and volume rebates are recorded as a reduction in sales at the time revenue is recognized in an amount estimated based on historical experience and contractual obligations.

We periodically review the assumptions underlying our estimates of discounts and volume rebates and adjusts revenues accordingly.

Note 4 — Derivative Instruments

We have in place an interest rate swap agreement to manage the risk associated with a portion of our variable-rate long-term debt.

We previously had in place an interest rate swap agreement to manage the risk associated with a portion of our variable-rate long-term debt.

We do not utilize derivative instruments for speculative purposes.

The interest rate swap involves the exchange of fixed-rate and variable-rate payments without the exchange of the underlying notional amount on which the interest payments are calculated.

The swap agreement will terminate on December 23, 2020, and the notional amount of the swap agreement is $ 20 million.

We have designated this swap as a cash flow hedge and have determined that it qualifies for hedge accounting treatment.

For so long as the hedge is effective, changes in fair value of the cash flow hedge are recorded in other comprehensive income or loss (net of tax) until income or loss from the cash flows of the hedged item is realized.

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 accounting treatment.

For so long as the hedge was effective, changes in fair value of the cash flow hedge were recorded in other comprehensive income or loss (net of tax) until income or loss from the cash flows of the hedged item was realized.

For the year ended March 28, 2021, we recorded $ 0.1 million in other comprehensive income related to unrealized gains (net of tax) on the cash flow hedge.

For the years ended March 29, 2020 and March 31, 2019, we recorded $ 0.4 million and $ 0.3 million in other comprehensive income related to unrealized losses (net of tax) on the cash flow hedge described above.

For the year ended April 1, 2018, we recorded $ 0.3 million in other comprehensive income related to unrealized gains (net of tax) on the cash flow hedge.

Included in other current liabilities on our condensed consolidated balance sheet was $ 0.1 million as of March 29, 2020.

Included in other long-term assets on our condensed consolidated balance sheet was $ 0.4 million as of March 31, 2019 and $ 0.8 million as of April 1, 2018.

Included in other long-term assets on our condensed consolidated balance sheet was $ 0.4 million as of March 31, 2019.

By their nature, derivative instruments are subject to market risk.

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Credit risk associated with derivatives is measured based on the replacement cost should the counterparty with a contract in a gain position to us fail to perform under the terms of the contract.

We do not anticipate nonperformance by the counterparty.

While the interest rate swap was in effect, we did not anticipate nonperformance by the counterparty.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 5 – Fair Value Measurements

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Because of the variable-rate nature of our debt under our credit facility, our debt also approximates fair value.

We classify the inputs used to measure fair value into the following hierarchy:

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Quoted prices in active markets for identical assets or liabilities.

Quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable or can be corroborated by observable market data for the asset or liability.

Unobservable inputs for the asset or liability that are supported by little or no market activity.

These fair values are determined using pricing models for which the assumptions utilize management’s estimates or market participant assumptions.

Assets and Liabilities Measured at Fair Value on a Recurring Basis.

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Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

Our financial assets that are measured at fair value on a recurring basis are an interest rate swap and assets held in a deferred compensation retirement plan.

Our financial assets that are measured at fair value on a recurring basis are an interest rate swap, which term ended in fiscal 2021, and assets held in a deferred compensation retirement plan.

As of March 28, 2021, the assets held in a deferred compensation retirement plan is classified as other long-term assets on our balance sheet, with the portion of the plan assets expected to be paid within twelve months classified as current assets.

As of March 29, 2020, the assets held in a deferred compensation retirement plan is classified as other long-term assets on our balance sheet, with the portion of the plan assets expected to be paid within twelve months classified as current assets and the interest rate swap is classified as other current liabilities on our balance sheet.

As of March 31, 2019, both of these assets were classified as other long-term assets on our balance sheet, with the portion of the deferred compensation retirement plan assets expected to be paid within twelve months reclassified to current assets.

The fair value of the interest rate swap is determined by the respective counterparties based on interest rate changes.

The fair value of the interest rate swap was determined by the respective counterparties based on interest rate changes.

Interest rate swaps are valued based on observable interest rate yield curves for similar instruments.

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Interest rate swap Level 2 — 108

Interest rate swap Level 2 108 —

Note 6 – Assets Held for Sale

In the third quarter of fiscal 2019, management entered into a plan of action to dispose of an office building in St.

Louis, Missouri currently utilized in the administration of our Industrial segment.

The amount of office space in this facility is no longer needed due to current staffing levels, and management expects to relocate affected employees to leased space.

The building is listed for sale at a price in excess of its current book value, and thus no impairment has been recognized.

The $ 0.9 million net book value of this property is recorded as an asset held for sale within prepaid expenses and other current assets on our balance sheet.

Included in assets held for sale as of March 28, 2021 is $ 0.7 million for an office building in St.

Louis, Missouri currently utilized in the administration of our Industrial segment, which is expected to be sold in the first quarter of fiscal 2022, and $ 0.2 million for a water treatment branch located in Eldridge, Iowa, which has been relocated to another owned facility and was sold in the first quarter of fiscal 2022.

At March 29, 2020, $ 0.9 million was included in assets held for sale pertaining to the St.

Louis building.

These amounts are recorded as assets held for sale within prepaid expenses and other current assets on our balance sheet.

HAWKINS, INC.

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(In thousands) Industrial Water Treatment Health and Nutrition Total

Balance as of April 1, 2018, March 31, 2019 and March 29, 2020 $ 6,495 $ 7,000 $ 44,945 $ 58,440

Balance as of March 31, 2019 and March 29, 2020 $ 6,495 $ 7,000 $ 44,945 $ 58,440

Addition due to acquisitions — 12,280 — 12,280

Balance as of March 28, 2021

$ 6,495 $ 19,280 $ 44,945 $ 70,720

The following is a summary of our identifiable intangible assets as of March 28, 2021 and March 29, 2020:

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Intangible asset amortization expense was $ 5.8 million during fiscal 2021, $ 5.1 million during fiscal 2020, and $ 5.5 million during fiscal 2019.

The estimated future amortization expense for identifiable intangible assets during the next five years is as follows:

(In thousands) 2021 2022 2023 2024 2025

Estimated amortization expense $ 5,028 $ 4,891 $ 4,891 $ 4,891 $ 4,891

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The estimated future amortization expense for identifiable intangible assets is as follows:

(In thousands) Intangible Assets

Fiscal 2022 $ 6,235

Fiscal 2023 6,159

Fiscal 2024 6,112

Fiscal 2025 6,112

Fiscal 2026 6,012

Thereafter $ 44,511

Total $ 75,141

Note 9 – Debt

On November 30, 2018, we entered into an amended and restated credit agreement (the “Credit Agreement”) with U.S.

We have in place an amended and restated credit agreement (the “Credit Agreement”) with U.S.

Bank National Association (“U.S.

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Bank is also serving as Administrative Agent.

The Credit Agreement refinanced the term and revolving loans under our previous credit agreement with U.S.

Bank and provides us with senior secured revolving credit facilities (the “Revolving Loan Facility”) totaling $ 150 million.

The Credit Agreement provides us with senior secured revolving credit facilities (the “Revolving Loan Facility”) totaling $ 150 million.

The Revolving Loan Facility includes a $ 5.0 million letter of credit subfacility and $ 15.0 million swingline subfacility.

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The Revolving Loan Facility is secured by substantially all of our personal property assets and those of our subsidiaries.

We used $ 91.0 million of the proceeds from the Revolving Loan Facility to refinance the obligations under the previous credit facility.

We may use the remaining amount of the Revolving Loan Facility for working capital, capital expenditures, share repurchases, restricted payments and acquisitions permitted under the Credit Agreement, and other general corporate purposes.

We may use the Revolving Loan Facility for working capital, capital expenditures, share repurchases, restricted payments and acquisitions permitted under the Credit Agreement, and other general corporate purposes.

At March 28, 2021, the effective interest rate on our borrowings was 1.1 %.

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unamortized debt issuance costs ( 248 ) ( 342 )

( 342 ) ( 435 )

Total debt, net of debt issuance costs 98,752 59,658

59,658 84,565

current portion of long-term debt, net of current unamortized debt issuance costs ( 9,907 ) ( 9,907 )

( 9,907 ) ( 9,907 )

Total long-term debt $ 88,845 $ 49,751

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Our Board of Directors has approved a performance-based equity compensation arrangement for our executive 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 stock based on our pre-tax income target for the applicable fiscal year.

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 executive officer will be determined when our final financial information becomes available after the applicable fiscal year and will be between zero shares and 124,770 shares in the aggregate for fiscal 2021.

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We record the compensation expense for the outstanding performance share units and then-converted restricted stock over the life of the awards.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table represents the restricted stock activity for fiscal 2020 and 2021:

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Outstanding at end of fiscal 2020 149,030 $ 17.13

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Granted 129,626 18.69

Vested ( 10,526 ) 15.68

Forfeited or expired ( 29,010 ) 17.92

Outstanding at end of fiscal 2021 239,120 $ 17.94

The weighted average grant date fair value of performance-based restricted shares issued in fiscal 2021 was $ 18.69 , fiscal 2020 was $ 17.25 and fiscal 2019 was $ 15.68 .

We recorded compensation expense on performance-based restricted stock of approximately $ 2.5 million for fiscal 2021, $ 1.5 million for fiscal 2020 and $ 1.3 million for fiscal 2019, substantially all of which was recorded in selling, general and administrative (“SG&A”) expense in the Consolidated Statements of Income.

The total fair value of performance-based restricted stock units vested was $ 1.3 million in fiscal 2020 and $ 1.1 million in fiscal 2019.

There were no performance-based restricted stock units that vested in fiscal 2018.

Until the performance-based restricted stock units result in the issuance of restricted stock, the amount of expense recorded each period is dependent upon our estimate of the number of shares that will ultimately be issued and our then current common stock price.

The total fair value of performance-based restricted stock units vested was $ 0.2 million in fiscal 2021, $ 1.3 million in fiscal 2020 and $ 1.1 million in fiscal 2019.

Upon issuance of restricted stock, we record compensation expense over the remaining vesting period using the award date closing price.

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Outstanding at end of fiscal 2020 16,016 $ 21.84

Granted 13,186 25.59

Vested ( 16,016 ) 21.84

Forfeited or expired ( 1,958 ) 25.53

Outstanding at end of fiscal 2021 11,228 $ 25.60

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Annual expense related to the value of restricted stock was $ 0.3 million in fiscal 2021, 2020 and 2019, and was recorded in SG&A expense in the Consolidated Statements of Income.

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Note 11 — Share Repurchases

Our board of directors has authorized the repurchase of up to 800,000 shares of our outstanding common stock.

Our board of directors has authorized the repurchase of up to 1,600,000 shares of our outstanding common shares.

The shares may be repurchased on the open market or in privately negotiated transactions subject to applicable securities laws and regulations.

Upon repurchase of the shares, we reduce our common stock for the par value of the shares with the excess applied against additional paid-in capital.

We repurchased 145,583 of common stock at an aggregate purchase price of $ 5.9 million during fiscal 2020.

We repurchased 108,166 of common stock at an aggregate purchase price of $ 4.4 million during fiscal 2019.

No shares were repurchased during fiscal 2018.

Upon repurchase of the shares, we reduce our common shares for the par value of the shares with the excess applied against additional paid-in capital.

We repurchased 166,088 of common shares at an aggregate purchase price of $ 4.1 million during fiscal 2021.

We repurchased 291,166 of common shares at an aggregate purchase price of $ 5.9 million during fiscal 2020.

We repurchased 216,332 of common shares at an aggregate purchase price of $ 4.4 million during fiscal 2019.

As of March 28, 2021, the number of shares available to be purchased under the share repurchase program was 551,506 .

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The retirement plan provides for a contribution of 2.5 % or 5.0 % of each employee’s eligible annual wages depending on their hire date.

In addition to the employer contributions described above, both the profit sharing plan and the retirement plant 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 compensation.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In addition to the employer contributions described above, both the profit sharing plan and the retirement 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 compensation.

We have two employee stock ownership plans (“ESOPs”), one covering the majority of our non-bargaining unit employees and the other covering our collective bargaining unit employees.

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We have an employee stock purchase plan (“ESPP”) covering substantially all of our employees.

The ESPP allows employees to purchase newly-issued shares of the Company’s common stock at a discount from market.

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 88,148 in fiscal 2021, 77,100 in fiscal 2020 and 87,356 in fiscal 2019.

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Payments of $ 467,000 per year are being made through 2034.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 13 — Commitments and Contingencies

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Legal fees associated with such matters are expensed as incurred.

Environmental Remediation :

During fiscal 2018, we recorded a liability of $ 0.6 million related to estimated remediation expenses associated with existing trichloroethylene contamination at our Minneapolis facility.

The liability was decreased to $ 0.1 million as of March 29, 2020 and $ 0.4 million as of March 31, 2019, to reflect payments made and management’s revised expectations related to the cost of this environmental remediation.

The liability is not discounted as management expects to incur these expenses within the next twelve months.

Given the many uncertainties involved in assessing environmental claims, our reserves may prove to be insufficient.

While it is possible that additional expenses related to remediation will be incurred in future periods if currently unknown issues arise, we are unable to estimate the extent of any further financial impact.

Asset Retirement Obligations.

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We will continue to monitor the factors surrounding the requirement to record an asset retirement obligation and will recognize the fair value of a liability in the period in which it is incurred and a reasonable estimate can be made.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 14 — Income Taxes

Tax Cuts and Jobs Act of 2017 (the “Tax Act”) included a number of provisions, including lowering of the U.S.

corporate tax rate from 35 % to 21 % effective January 1, 2018.

Under GAAP, deferred tax assets and liabilities are required to be revalued during the period in which the new tax legislation is enacted.

As such, during fiscal 2018 we revalued our net deferred tax liabilities to reflect the impact of the Tax Act and recorded a one-time benefit of $ 13.9 million.

The accounting for the impact of the Tax Act was finalized during fiscal 2019 and there were no material adjustments to the estimates used under provisional accounting.

Our effective tax rate for fiscal 2018 was also impacted by the $ 39.1 million goodwill impairment charge which was recorded for book purposes but was not deductible for tax purposes.

In March 2020, the United States government approved the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), providing tax relief to certain individuals and corporations.

Other than allowing bonus depreciation on certain qualified improvement property not previously permitted under the Tax Act, the CARES Act is not expected to have an impact on our federal income tax provision.

The provisions for income taxes for fiscal 2021, 2020 and 2019 were as follows:

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ESOP dividend deduction on allocated shares ( 0.2 ) % ( 0.3 ) % ( 0.3 ) %

Domestic production deduction — % — % 2.7 %

Goodwill impairment — % — % ( 81.7 ) %

Revaluation of net deferred tax liabilities — % — % 92.5 %

Other — net ( 0.1 ) % 0.8 % 0.6 %

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Intangible assets ( 15,269 ) ( 15,936 )

Unrealized gain on interest rate swap — ( 118 )

ROU asset ( 3,140 ) ( 2,454 )

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Note 15 – Leases

On April 1, 2019, we adopted ASU 2016-02 and related amendments using the modified retrospective method applied to existing leases in place as of April 1, 2019.

Leases entered into after April 1, 2019 are presented under the provisions of ASU 2016-02, while prior periods are not adjusted and continue to be reported in accordance with previous accounting guidance.

Leases commencing or renewing after the adoption date are evaluated based on the guidance in ASU 2016-02 and may result in more finance leases being recognized even for the renewal of previously classified operating leases.

We do not currently have any leases that qualify as financing leases.

We elected to adopt the 'package of practical expedients’, which permitted us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs.

We elected the short-term lease recognition exemption for all leases that qualified.

This means, for those leases that qualified, we did not recognize right-of-use assets or lease liabilities, and this included not recognizing right-of-use assets or lease liabilities for existing short-term leases of those assets in transition.

We also elected the practical expedient to not separate lease and non-lease components for all leases other than leases of real estate, and this included not separating lease and non-lease components for all leases other than leases of real estate in transition.

We adopted ASU 2016-02 using the modified retrospective method, recognizing the cumulative effect of application as an adjustment to the oening balance sheet.

The standard had a material impact on our condensed consolidated balance sheet, but did not have a material impact on our condensed consolidated statement of income or cash flows.

The most significant impact was the recognition of the ROU asset and lease liabilities for operating leases, both of which were approximately $ 10.4 million upon adoption.

Lease Obligations.

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Our leases have remaining lease terms of 1 year to 23 years, some of which include options to extend the lease for up to 15 years .

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of March 29, 2020, our operating lease components with initial or remaining terms in excess of one year were classified on the condensed consolidated balance sheet within right of use assets, short-term lease liability and long-term lease liability.

Total lease expense was $ 2.8 million for the twelve months ended March 29, 2020, and includes leases less than 12 months in duration.

As of March 28, 2021 and March 29, 2020, our operating lease components with initial 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 $ 2.8 million for the both twelve months ended March 28, 2021 and March 29, 2020, and includes leases less than 12 months in duration.

Our facility in Fullerton, California is leased from a party related to Daniel Stauber, one of our Board members.

The total amount of lease expense related to this lease in fiscal 2021 was $ 0.5 million, of which less than $ 0.1 million was attributable to Mr.

We have included $ 5.7 million on our balance sheet as a right-of-use asset, with a corresponding equal amount of lease liabilities, related to this lease.

Other information related to our operating leases was as follows:

March 29, 2020

March 29, 2021 March 29, 2020

Lease Term and Discount Rate

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Weighted average discount rate 2.7 % 4.1 %

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Maturities of lease liabilities as of March 28, 2021 were as follows:

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Present value of lease liabilities $ 11,818

As we have not restated prior year information for our adoption of ASC Topic 842, the following represents our future minimum lease payments for operating leases under ASC Topic 840 on March 31, 2019:

(In thousands) Operating Leases

Fiscal 2020 $ 2,198

Fiscal 2021 1,783

Fiscal 2022 1,407

Fiscal 2023 1,352

Fiscal 2024 1,183

Thereafter 5,473

Total $ 13,396

Note 16 — Segment Information

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There are no intersegment sales and no operating segments have been aggregated.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Reportable Segments Industrial Water

15 unchanged sentences

Capital expenditures $ 14,933 $ 9,160 $ 456 $ 24,549

Fiscal Year Ended April 1, 2018:

Fiscal Year Ended March 31, 2019:

Sales $ 281,860 $ 149,490 $ 124,976 $ 556,326

1 unchanged sentence

Selling, general, and administrative expenses 22,759 19,498 16,861 59,118

Goodwill impairment — — 39,116 39,116

Operating income 12,141 18,488 6,189 36,818

1 unchanged sentence

Capital expenditures $ 7,319 $ 4,506 $ 793 $ 12,618

* Unallocated assets, consisting primarily of cash and cash equivalents, investments and prepaid expenses, were $ 13.0 million at March 29, 2020, $ 18.4 million at March 31, 2019 and $ 14.3 million at April 1, 2018.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 16 — Selected Quarterly Financial Data (Unaudited)

(In thousands, except per share data) Fiscal 2020

First Second Third Fourth

Sales $ 147,336 $ 140,043 $ 120,406 $ 132,413

Gross profit 28,797 27,994 21,478 22,648

Selling, general, and administrative expenses 14,836 14,817 14,702 14,891

Operating income 13,961 13,177 6,776 7,757

Net income 9,807 9,250 4,547 4,763

Basic earnings per share $ 0.92 $ 0.87 $ 0.43 $ 0.45

Diluted earnings per share $ 0.92 $ 0.87 $ 0.43 $ 0.45

First Second Third Fourth

Sales $ 149,800 $ 145,324 $ 128,151 $ 133,051

Gross profit 28,457 25,772 21,033 20,674

Selling, general, and administrative expenses 14,979 14,941 14,312 14,886

Operating income 13,478 10,831 6,721 5,788

Net income 9,123 7,409 4,130 3,771

Basic earnings per share $ 0.86 $ 0.69 $ 0.39 $ 0.35

Diluted earnings per share $ 0.85 $ 0.69 $ 0.39 $ 0.35

First Second Third Fourth

Sales $ 133,731 $ 125,395 $ 118,053 $ 126,990

Gross profit 25,999 24,115 18,840 17,806

Selling, general, and administrative expenses 15,766 14,828 14,139 14,670

Goodwill impairment — — — 39,116

Operating income (loss) 10,233 9,287 4,701 ( 35,980 )

Net income (loss) 5,831 5,210 17,143 ( 37,361 )

Basic earnings (loss) per share $ 0.55 $ 0.49 $ 1.62 $ ( 3.51 )

Diluted earnings (loss) per share $ 0.55 $ 0.49 $ 1.61 $ ( 3.50 )

Earnings (loss) per share may not equal the face of the Consolidated Statements of Income (Loss) due to rounding.

* Unallocated assets not included, consisting primarily of cash and cash equivalents, investments and prepaid expenses, were $ 14.8 million at March 28, 2021, $ 13.0 million at March 29, 2020 and $ 18.4 million at March 31, 2019.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data