What changed in this filing

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Item 1. Financial Statements

2022-02-02 compared with 2021-10-27 · 94 added, 66 removed, 375 unchanged (30% of the section changed)

3 unchanged sentences

(In thousands, except share data)

September 26,

2021 March 28,

21 unchanged sentences

Accrued payroll and employee benefits 15,848 18,048

Income tax payable 877 —

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

14 unchanged sentences

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

20,888,923 and 20,969,746 shares issued and outstanding as of September 26, 2021 and March 28, 2021, respectively

20,858,385 and 20,969,746 shares issued and outstanding as of December 26, 2021 and March 28, 2021, respectively

Additional paid-in capital 44,723 51,138

6 unchanged sentences

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

Three Months Ended Six Months Ended

September 26,

2021 September 27,

2020 September 26,

2021 September 27,

Three Months Ended Nine Months Ended

2021 December 27,

2020 December 26,

2021 December 27,

Sales $ 187,050 $ 142,927 $ 551,568 $ 433,900

17 unchanged sentences

(In thousands)

Three Months Ended Six Months Ended

September 26,

2021 September 27,

2020 September 26,

2021 September 27,

Three Months Ended Nine Months Ended

2021 December 27,

2020 December 26,

2021 December 27,

Net income $ 10,204 $ 7,921 $ 40,965 $ 31,899

4 unchanged sentences

HAWKINS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(In thousands, except share data)

19 unchanged sentences

BALANCE — September 26, 2021 20,888,923 $ 209 $ 44,801 $ 239,303 $ — $ 284,313

Cash dividends declared and paid — — — ( 2,745 ) — ( 2,745 )

Share-based compensation expense — — 1,046 — — 1,046

Shares repurchased ( 30,538 ) — ( 1,124 ) — — ( 1,124 )

Net income — — — 10,204 — 10,204

BALANCE — December 26, 2021 20,858,385 $ 209 $ 44,723 $ 246,762 $ — $ 291,694

Common Stock Additional

15 unchanged sentences

ESPP shares issued 42,720 — 773 — — 773

Other comprehensive gain, net of tax — — — — 39 39

Other comprehensive income, net of tax — — — — 39 39

Net income — — — 12,190 — 12,190

BALANCE — September 27, 2020 21,090,406 $ 211 $ 52,510 $ 201,966 $ ( 50 ) $ 254,637

Cash dividends declared and paid — — — ( 2,471 ) — ( 2,471 )

Share-based compensation expense — — 918 — — 918

Shares repurchased ( 166,088 ) ( 2 ) ( 4,138 ) — — ( 4,140 )

Other comprehensive income, net of tax — — — — 50 50

Net income — — — 7,921 $ — 7,921

BALANCE — December 27, 2020 20,924,318 $ 209 $ 49,290 $ 207,416 $ — $ 256,915

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Six Months Ended

September 26,

2021 September 27,

Nine Months Ended

2021 December 27,

CASH FLOWS FROM OPERATING ACTIVITIES:

5 unchanged sentences

Stock compensation expense 2,707 2,303

Other 379 170

Changes in operating accounts providing (using) cash:

15 unchanged sentences

New shares issued 889 773

Shares surrendered for payroll taxes ( 1,467 ) ( 54 )

Payroll taxes paid in exchange for shares withheld ( 1,467 ) ( 54 )

Shares repurchased ( 8,545 ) ( 4,140 )

Net (payments on) proceeds from revolving loan ( 15,000 ) 16,000

Payments on revolving loan ( 15,000 ) ( 24,000 )

Proceeds from revolving loan borrowings 32,000 60,000

Net cash (used in) provided by financing activities ( 224 ) 25,149

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,804 ( 1,117 )

NET INCREASE IN CASH AND CASH EQUIVALENTS 20,440 3,692

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,998 4,277

14 unchanged sentences

All significant intercompany accounts and transactions have been eliminated in consolidation.

The results of operations for the six months ended September 26, 2021 are not necessarily indicative of the results that may be expected for the full year.

The results of operations for the nine months ended December 26, 2021 are not necessarily indicative of the results that may be expected for the full year.

References to fiscal 2020 refer to the fiscal year ended March 29, 2020, references to fiscal 2021 refer to the fiscal year ended March 28, 2021 and references to fiscal 2022 refer to the fiscal year ending April 3, 2022.

7 unchanged sentences

Note 2 — Acquisitions

Acquisition of Water and Waste Specialties, Inc.:

On October 29, 2021, we acquired substantially all the assets of Water and Waste Specialties, Inc., under the terms of a purchase agreement with Water and Waste Specialties and its shareholders.

We paid $ 1.4 million at closing for the acquisition.

Water and Waste Specialties was a water treatment chemical distribution company operating primarily in Alabama.

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 under the acquisition method of accounting, under which the total purchase price is allocated to the net tangible and intangible assets and liabilities of Water and Waste Specialties 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 total $ 1.4 million purchase price, we allocated $ 0.5 million to finite-lived intangible assets, primarily customer relationships to be amortized over 11 years, and $ 0.4 million to property, plant and equipment.

The residual amount of $ 0.5 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.

Acquisition of Southeast Water Systems LLC:

6 unchanged sentences

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

Of the total $ 2.2 million purchase price, we allocated $ 0.4 million to finite-lived intangible assets, primarily customer relationships to be amortized over 10 years, and $ 0.1 million to property, plant and equipment.

Of the total $ 2.2 million purchase price, which includes a contingent consideration liability of $ 1.0 million, we allocated $ 0.4 million to finite-lived intangible assets, primarily customer relationships to be amortized over 10 years, and $ 0.1 million to property, plant and equipment.

The residual amount of $ 1.7 million was allocated to goodwill.

26 unchanged sentences

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

The following tables disaggregate external customer net sales by major revenue stream for the three and six months ended September 26, 2021 and September 27, 2020:

Three months ended September 26, 2021

The following tables disaggregate external customer net sales by major revenue stream for the three and nine months ended December 26, 2021 and December 27, 2020:

Three months ended December 26, 2021

(In thousands) Industrial Water

7 unchanged sentences

Total external customer sales $ 100,554 $ 49,756 $ 36,740 $ 187,050

Three months ended September 27, 2020

Three months ended December 27, 2020

(In thousands) Industrial Water

7 unchanged sentences

Total external customer sales $ 64,356 $ 39,298 $ 39,273 $ 142,927

Six months ended September 26, 2021

Nine months ended December 26, 2021

(In thousands) Industrial Water

7 unchanged sentences

Total external customer sales $ 269,572 $ 168,105 $ 113,891 $ 551,568

Six months ended September 27, 2020

Nine months ended December 27, 2020

(In thousands) Industrial Water

15 unchanged sentences

Basic and diluted EPS were calculated using the following:

Three Months Ended Six Months Ended

September 26, 2021 September 27, 2020 September 26, 2021 September 27, 2020

Three Months Ended Nine Months Ended

December 26, 2021 December 27, 2020 December 26, 2021 December 27, 2020

Weighted-average common shares outstanding—basic 20,885,232 21,013,836 20,968,692 21,043,042

14 unchanged sentences

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

As of September 26, 2021 and March 28, 2021, the assets held in a deferred compensation retirement plan were 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 on our balance sheet.

As of December 26, 2021 and March 28, 2021, the assets held in a deferred compensation retirement plan were 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 on our balance sheet.

The deferred compensation plan assets relate to contributions made to a non-qualified compensation plan on behalf of certain employees who are classified as “highly compensated employees” as determined by IRS guidelines.

1 unchanged sentence

The fair value of the deferred compensation is based on the quoted market prices for the mutual funds at the end of the period.

T he following tables summarize the balances of assets and liabilities measured at fair value on a recurring basis as of September 26, 2021 and March 28, 2021.

(In thousands) September 26, 2021 March 28, 2021

Our financial liability that is measured at fair value on a recurring basis consists of a contingent earnout liability in connection with our acquisition of Southeast Water Systems LLC.

The contingent earnout liability was classified as other long-term liabilities on our balance sheet, with the portion of the contingent earnout liability expected to be paid within 12 months classified as current liabilities on our balance sheet.

The following tables summarize the balances of assets and liabilities measured at fair value on a recurring basis as of December 26, 2021 and March 28, 2021.

(In thousands) December 26, 2021 March 28, 2021

Deferred compensation plan assets Level 1 $ 7,496 $ 5,946

Contingent consideration liability Level 3 $ 970 $ —

Note 6– Assets Held for Sale

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

Louis, Missouri which was utilized in the administration of our Industrial segment and $ 0.2 million for a water treatment branch located in Eldridge, Iowa, which has been relocated to another owned facility.

Louis, Missouri which was utilized in the administration of our Industrial segment and $ 0.2 million for a former water treatment branch located in Eldridge, Iowa, which has been relocated to another owned facility.

Both were sold in the first quarter of fiscal 2022.

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

Note 7 – Inventories

Inventories at September 26, 2021 and March 28, 2021 consisted of the following:

September 26,

Inventories at December 26, 2021 and March 28, 2021 consisted of the following:

2021 March 28,

3 unchanged sentences

Net inventory $ 76,242 $ 63,864

The first in, first out (“FIFO”) value of inventories accounted for under the last in, first out (“LIFO”) method was $ 57.0 million at September 26, 2021 and $ 46.8 million at March 28, 2021.

The first in, first out (“FIFO”) value of inventories accounted for under the last in, first out (“LIFO”) method was $ 64.3 million at December 26, 2021 and $ 46.8 million at March 28, 2021.

The remainder of the inventory was valued and accounted for under the FIFO method.

Note 8 – Goodwill and Intangible Assets

The carrying amount of goodwill was $ 72.4 million as of September 26, 2021 and $ 70.7 million as of March 28, 2021, of which $ 44.9 million was related to our Health and Nutrition segment, $ 21.0 million was related to our Water Treatment segment, and $ 6.5 million was related to our Industrial segment.

The increase in goodwill during the six months ended September 26, 2021 represents goodwill recorded in connection with the acquisition of the assets of Southeast Water Systems, LLC as discussed in Note 2.

A summary of our intangible assets as of September 26, 2021 and March 28, 2021 is as follows:

September 26, 2021 March 28, 2021

The carrying amount of goodwill was $ 72.9 million as of December 26, 2021 and $ 70.7 million as of March 28, 2021, of which $ 44.9 million was related to our Health and Nutrition segment, $ 21.5 million was related to our Water Treatment segment, and $ 6.5 million was related to our Industrial segment.

The increase in goodwill during the nine months ended December 26, 2021 represents goodwill recorded in connection with the acquisitions of the assets of Southeast Water Systems and Water and Waste Specialties as discussed in Note 2.

A summary of our intangible assets as of December 26, 2021 and March 28, 2021 is as follows:

December 26, 2021 March 28, 2021

(In thousands) Gross

11 unchanged sentences

Note 9 – Debt

Debt at September 26, 2021 and March 28, 2021 consisted of the following:

September 26,

Debt at December 26, 2021 and March 28, 2021 consisted of the following:

2021 March 28,

5 unchanged sentences

Total long-term debt $ 105,915 $ 88,845

We were in compliance with all covenants of the Credit Agreement as of December 26, 2021.

Note 10 – Income Taxes

3 unchanged sentences

income tax jurisdictions.

Our effective tax rate was approximately 26 % for both the six months ended September 26, 2021 and for the six months ended September 27, 2020.

Our effective tax rate was approximately 26 % for both the nine months ended December 26, 2021 and for the nine months ended December 27, 2020.

The effective tax rate is impacted by projected levels of annual taxable income, permanent items, and state taxes.

1 unchanged sentence

Lease Obligations.

As of September 26, 2021, we were obligated under operating lease agreements for certain manufacturing facilities, warehouse space, the land on which some of our facilities sit, vehicles and information technology equipment.

As of December 26, 2021, we were obligated under operating lease agreements for certain manufacturing facilities, warehouse space, the land on which some of our facilities sit, vehicles and information technology equipment.

Our leases have remaining original lease terms of 1 year to 23 years, some of which include options to extend the lease for up to 10 years .

As of September 26, 2021, 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.

Expense for leases less than 12 months was no t material for the three and six months ended September 26, 2021 and September 27, 2020.

Total lease expense was $ 0.7 million for both the three months ended September 26, 2021 and September 27, 2020, and was $ 1.4 million for both the six months ended September 26, 2021 and September 27, 2020.

As of December 26, 2021, 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.

Expense for leases less than 12 months was no t material for the three and nine months ended December 26, 2021 and December 27, 2020.

Total lease expense was $ 0.7 million for both the three months ended December 26, 2021 and December 27, 2020, and was $ 2.1 million for both the nine months ended December 26, 2021 and December 27, 2020.

Other information related to our operating leases was as follows:

September 26, 2021 March 28, 2021

December 26, 2021 March 28, 2021

Lease Term and Discount Rate

1 unchanged sentence

Weighted average discount rate 2.6 % 2.7 %

Maturities of lease liabilities as of September 26, 2021 were as follows:

Maturities of lease liabilities as of December 26, 2021 were as follows:

(In thousands) Operating Leases

15 unchanged sentences

We are recording the compensation expense for the outstanding performance share units and the converted restricted stock over the life of the awards.

The following table represents the restricted stock activity for the six months ended September 26, 2021:

The following table represents the restricted stock activity for the nine months ended December 26, 2021:

Shares Weighted-

5 unchanged sentences

Unvested at end of period 227,736 $ 25.08

We recorded compensation expense related to performance share units and restricted stock of $ 0.6 million and $ 1.2 million for the three and six months ended September 26, 2021, respectively.

We recorded compensation expense related to performance share units and restricted stock of $ 0.5 million and $ 1.0 million for the three and six months ended September 27, 2020, respectively.

We recorded compensation expense related to performance share units and restricted stock of $ 0.8 million and $ 2.0 million for the three and nine months ended December 26, 2021, respectively.

We recorded compensation expense related to performance share units and restricted stock of $ 0.7 million and $ 1.6 million for the three and nine months ended December 27, 2020, respectively.

Substantially all of the compensation expense was recorded in selling, general and administrative expenses in the condensed consolidated statements of income.

2 unchanged sentences

The restricted stock awards are generally expensed over a one-year vesting period, based on the market value on the date of grant.

As of September 26, 2021, there were 9,282 shares of restricted stock with an average grant date fair value of $ 32.31 outstanding under this program.

Compensation expense for both the three months ended September 26, 2021 and September 27, 2020 related to restricted stock awards to the Board was $ 0.1 million.

Compensation expense for both the six months ended September 26, 2021 and September 27, 2020 related to restricted stock awards to the Board was $ 0.2 million.

As of December 26, 2021, there were 10,287 shares of restricted stock with an average grant date fair value of $ 32.80 outstanding under this program.

Compensation expense for both the three months ended December 26, 2021 and December 27, 2020 related to restricted stock awards to the Board was $ 0.1 million.

Compensation expense for both the nine months ended December 26, 2021 and December 27, 2020 related to restricted stock awards to the Board was $ 0.2 million.

Note 13 – Share Repurchase Program

1 unchanged sentence

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

During the three months ended September 26, 2021, we repurchased 109,009 shares at an aggregate purchase price of $ 4.0 million.

During the six months ended September 26, 2021, we repurchased 209,963 shares at an aggregate purchase price of $ 7.4 million.

During the three and six months ended September 27, 2020, no shares were repurchased.

As of September 26, 2021, 341,543 shares remained available to be repurchased under the share repurchase program.

During the three months ended December 26, 2021, we repurchased 30,538 shares at an aggregate purchase price of $ 1.1 million.

During the nine months ended December 26, 2021, we repurchased 240,501 shares at an aggregate purchase price of $ 8.5 million.

During the three and nine months ended December 27, 2020, we repurchased 166,088 shares at an aggregate purchase price of $ 4.1 million.

As of December 26, 2021, 311,005 shares remained available to be repurchased under the share repurchase program.

Note 14 – Segment Information

5 unchanged sentences

Segments are responsible for the sales, marketing and development of their products and services.

Other than our Health and Nutrition segment, the segments do not have separate customer service or purchasing functions.

We allocate certain corporate expenses to our operating segments.

4 unchanged sentences

Treatment Health and Nutrition Total

Three months ended September 26, 2021:

Three months ended December 26, 2021:

Sales $ 100,554 $ 49,756 $ 36,740 $ 187,050

2 unchanged sentences

Operating income 7,936 2,849 3,474 14,259

Three months ended September 27, 2020:

Three months ended December 27, 2020:

Sales $ 64,356 $ 39,298 $ 39,273 $ 142,927

2 unchanged sentences

Operating income 2,229 3,239 5,021 10,489

Six months ended September 26, 2021:

Nine months ended December 26, 2021:

Sales $ 269,572 $ 168,105 $ 113,891 $ 551,568

2 unchanged sentences

Operating income 22,057 22,134 11,794 55,985

Six months ended September 27, 2020:

Nine months ended December 27, 2020:

Sales $ 197,029 $ 128,552 $ 108,319 $ 433,900

2 unchanged sentences

Operating income 12,626 18,234 12,143 43,003

No significant changes to identifiable assets by segment occurred during the six months ended September 26, 2021.

No significant changes to identifiable assets by segment occurred during the nine months ended December 26, 2021.

Note 15 – Subsequent Events

On December 30, 2021, we acquired substantially all the assets of NAPCO Chemical Company, Inc.

and its affiliates ("NAPCO") for $ 18.5 million, subject to a working capital adjustment, under the terms of an asset purchase agreement among us, NAPCO and certain other parties thereto.

NAPCO manufactures and distributes water treatment chemicals from three locations in Texas.

The results of operations and the assets, including the goodwill associated with this acquisition, will be included as part of our Water Treatment segment from the date of acquisition forward.

The purchase accounting for this acquisition has not yet been completed.

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-Q

Item 1. Financial Statements